About Government Refinance and Home Purchase Programs

After a long march upward, the US stock market has been taking a beating in the last week or so. The Dow Jones Industrial Average is down nearly 800 points for its high point at the end of December. The other indexes are seeing similar sell offs over the last ten days.

While the stock sell-off is not great news for the portfolios of investors, it has been good news for mortgage interest rates. As investors pull money out of stocks they tend to invest money in other places like mortgage backed securities and bonds. That inflow of money leads to lower mortgage interest rates. And as expected, mortgage interest rates have been drifting lower in the last week.

Odds are that mortgage interest rates will move significantly higher over the course of 2014, but there will be dips along the way. We are entering one of those dips right now so if you have considered looking in to refinancing your mortgage or buying a home, contact us right away. There is no telling how long this dip in rates will last or if we will see a dip in rates like this again.

As we enter 2014 we also enter a new phase of mortgage regulations. Several new rules designed to prevent another housing bubble from emerging are set to take effect this week. For borrowers, the new rules will mostly mean that it will be a little harder to qualify for large loan amounts. The most substantial change for borrowers is a tightening of debt-to-income ratio limits on conventional (Fannie and Freddie) mortgages. There is now a fixed 43% debt-to-income ratio cap on conventional mortgages that cannot be exceeded. That means all of a borrowers monthly debt payments, including the mortgage, should not exceed 43% of gross monthly income. For middle class families this could have an impact on the amount they can borrow to purchase a home or to refinance.

Of course there is wisdom in keeping DTI ratios low, but in some cases it helps to have more wiggle room with DTI. The good news is there are alternatives to conventional mortgages though. The new debt-to-income ratios don’t apply to FHA or VA loans for instance. Plus there are other alternatives that can be investigated on a case by case basis.

Contact us today to learn more and see which government refinance or home purchase programs best fit your situation.

There was good news this week from the new director of the Federal Housing Finance Agency (FHFA), Mel Watt. Fannie Mae and Freddie Mac were schedule raise their fees at the start of 2014 and those fee hikes would have resulted directly in higher interest rates. Mr. Watt announced this week that he was putting a hold on those scheduled fee increases for at least six months to give him and his department more time to analyze the consequences of such a hike.

Here is what Watt said on the matter:

“Upon being sworn in as Director of the Federal Housing Finance Agency, I intend to announce that the FHFA will delay implementation of the g-fee and risk-based pricing plan announced in the FHFA’s news release dated December 9, 2013 (and detailed more fully in the Loan-Level Price Adjustment Matrix released earlier this week) until such time as I have had the opportunity to evaluate fully the rationale for the plan and the plan’s likely impact on the GSE’s risk exposure, the cost and availability of credit and how the plan would interface with the qualified mortgage standards.”

Anything that prevents rate hikes is good news to borrowers. Contact us today to get more information on available programs.

Recent reports have shown that the values of homes in nearly all U.S. markets continue to increase. In some hard hit markets values are up more than 50% over the lows they hit in recent years. In most every market housing values have been steadily increasing.

Increasing housing prices open several options for homeowners and perspective homeowners:

Refinancing to remove mortgage insurance (PMI) — A large percentage of American homeowners purchased their homes with less than a 20% downpayment. That means those homeowners are paying a monthly mortgage insurance fee. For instance, FHA loans include mortgage insurance. When a home increases in value it opens the possibility of refinancing to a new loan with no mortgage insurance. Contact us to get an estimate on the current value of your home to see if removing your monthly PMI is possible.

Cash out refinances — As values of homes increase, the possibility of getting cash out refinances returns. For families who owe quite a bit less than their home is worth, a cash out refinance can be a terrific way tap into the equity of a home. And with rates still historically low, cash out refinances make sense for a lot of families.

Home purchases — As we have discussed in the past, increasing home prices are generally a good thing for families considering buying a home. When home prices are increasing, the home you buy this year should be worth more in the years to come.

Contact us in the form in the sidebar today to learn more about the options available to you. Now is an excellent time to start while mortgage interest rates are still hovering near historic lows.

Over the last few years there has been a lot of buzz about principal reduction programs for underwater homeowners. The FHA even came out with some guidelines related to a principal reduction program in 2010. The problem was, none of the principal reduction programs announced were mandatory. That means the banks were left to voluntarily forgive debts. As you can imagine, banks were not anxious to give money away.

However, principal reductions can and do make sense in some cases for banks. For example, foreclosing on a home is a long and expensive process for a bank and in some cases a bank determines that it would be financially better off reducing the principal owed on a home and keeping the current borrower in the house than going through a long foreclosure process and then selling the bank-owned home at a steep discount. Losing $30,000 with a principal reduction is better than losing $60,000 after a long foreclosure and home sale process. Other reasons to reduce principal exist as well.

Each potential principal reduction case is unique and should be looked at individually. If you are researching a principal reduction, contact us in the form on the right to have one of our counselors look at your situation and point you in the right direction.

As housing values all across the country increase, the opportunities to get cash out refinances are increasing too. For homeowners with substantial equity in their homes there are numerous reasons to be interested in a cash out refinance: Home improvements, increasing cash reserves, paying down more expensive debts, etc. The benefit of a cash out refinance is it allows borrowers to tap into the equity of what is likely their biggest asset, their home, at an interest rate that is normally lower than they could get in any other way.

There are several government-backed programs that allow for cash out refinances. With Fannie Mae and Freddie Mac you can normally get up to 80% cash out without adding mortgage insurance. FHA allows up to 85% cash out. And military veterans can get up to 100% cash out through the VA mortgage program.

Contact us in the sidebar today to learn more about your options with government-backed cash out refinance programs.

Despite the federal government shutdown that recently ended, mortgage interest rates remain extremely low by historical measures. The dip we saw in mortgage interest rates in September and again in October after the Fed decided not to taper its stimulus program has persisted. That means now is still an excellent time to start the process of a refinance or home purchase.

Of course there remains a lot of uncertainty about what will happen with interest rates. If a new government shutdown happens, or worse, if the US defaults on its debts in the months to come, we would likely see a spike in mortgage interest rates. But as of now neither of those outcomes seem likely. With any luck a permanent resolution to the debt ceiling disagreements will be reached soon and rates will stay at the current low levels we are seeing through the end of 2013.

In any case, the odds that rates will be moving higher over the next few months remain high. So now is the time to contact us in the form on the right to get the ball rolling on a new government-backed mortgage. Rates are still near all time lows and there are excellent programs in place for consumers.

Recent reports have shown an uptick in the number of “jumbo” mortgage refinances and refinances into 15 year mortgages rather than the more traditional 30 year term.

Advantages of 15 year mortgages

There are several advantages to getting a 15 year mortgage rather than a 30 year. First, interest rates on 15 year mortgages are normally more than a half a percent lower than their 30 year counterparts. Second, by paying off the mortgage twice a fast, the amount of interest paid over the life of a 15 year loan is significantly lower that a 30 year loan. The main disadvantage to 15 year mortgages is that monthly payments are higher. But for families who can comfortably afford higher payments, a 15 year mortgage is often a very wise choice. Contact us to learn more about rates and costs associated with a 15 year mortgage.

On jumbo loans

The term “jumbo loan” refers to a loan that is larger than the national $417,000 loan limit for conforming loans. Jumbo loans have traditionally had higher interest rates than conforming loans but recently rates on jumbos have as low or sometimes even lower than conforming loan rates. If you have a large loan and feel your rate is too high, contact us in the sidebar right away to see about refinancing while jumbo rates are dipping to new lows.

There are new mortgage rules coming in January of 2014 that will make getting a government-backed mortgage more difficult. While there are several rule changes on tap, the one that will affect borrowers most is the new stricter debt to income ratio rule.

Debt to income (DTI) ratios take the total monthly mortgage payment, including property taxes, homeowners insurance, and homeowners association fees, and compare them to the gross monthly income of a borrower. So for example, a borrower who earns $4000 per month in salary before taxes, and who has a total mortgage payment of $1000, would have a housing debt to income ratio of 25%. Of course housing is not the only household expense, so if that person had other loans she were paying off, like car payments, student loans, or credit cards that added up to another $1000 per month, her total monthly debt payments would be $2000 per month. With a gross monthly income of $4000 that would put her total or “back end” debt to income ratio at 50%.

Currently debt to income ratios can be as high a 50% or even 60% in some cases on government-backed mortgages. Starting in January it will be very difficult to qualify for a mortgage if the total or “back end” debt to income ratio exceeds 43%.

While this news is not devastating, it will make it harder for many people to qualify for a refinance. Further, it will mean that home buyers will qualify for less money than they currently can.

With that in mind, if you are considering buying a home or refinancing now is the time to contact us to get the process started. Rates are still historically low and many people who can qualify for the mortgage they are seeking now may no longer qualify with the new, stricter guidelines begin in early 2014. Contact us in the sidebar today to learn more and to get started.

The federal government ended its shutdown last night and the immediate impact on mortgage interest rates has been positive. Investors rushed into buying US treasury bonds again as the threat of a default abated and that in turn caused yields on the 10 year T-Note to drop, which in turn has caused mortgage interest rates to drop.

Of course market forces and mortgage interest rates are always in flux so now is an excellent time to get the ball rolling on a refinance or a home purchase. The current deal to end the government shutdown only lasts a few months so another showdown could be looming at the start of 2014. In addition, there is the ever-present possibility that the Fed will start tapering its stimulus program that has been compressing interest rates for some time. The reality is that the last part of 2013 may be the last we see of these historically low interest rates.

Fill in the contact form on the right today and one of our counselors can point you in the right direction to get qualified to purchase a home or to refinance to a better rate while these excellent rates are still available.

As we discussed recently, the government shut down could potentially slow the flow of government-backed mortgages due to lack of manpower at the FHA and VA. But one week in to the shut down mortgage rates have drifted lower as well.

It appears that investors are getting skittish about the current shut down and pending debt ceiling debate. In response to those concerns more investors are moving money into the relatively safe haven of treasury bonds. The more money moves into bonds, the lower the yield on those bonds moves, and mortgage interest rates tend to drop in concert with the yield on treasuries.

In the end, what really matters to most Americans is mortgage interest rates are lower now than they were this summer. This dip in rates probably won’t last long though so fill in the contact form on the right to learn how to get the ball rolling on a refinance or home purchase right away.

In the wake of the Fed’s decision to continue pouring $85 billion per month into the economy until further notice, yields on US treasuries have been dropping, and mortgage interest rates have been dropping with them. Prior to the announcement, the financial markets were fully expecting the Fed to begin easing back on its stimulus program and had already adjusted rates accordingly in anticipation. The surprise news from the Fed has sent mortgage interest rates lower.

This is terrific news for folks who thought they had missed the chance to refinance or buy a home at low rates. While rates are unlikely to set new record lows, they have dropped significantly in the last week. Contact us in the sidebar today to learn more and to be referred to a specially authorized lender who can help you with a government-backed refinance or home purchase loan.