About Government Refinance and Home Purchase Programs

Mortgage interest rates temporarily spiked over the 4th of July weekend in reaction to better than expected jobs numbers. Then earlier this week Federal Reserve Chairman Ben Bernanke gave a speech in which he made it clear that the Fed had no intentions of decreasing support of financial markets any time soon. Those comments from Bernanke had a major calming effect on markets and led to an immediate stock market rally combined with a pullback in mortgage rates. With any luck rates will continue to drift lower for the next few weeks. Rates remain quite low by historical measures this summer but probably won’t stay this low for long. Contact us in the sidebar right away to learn more about the available government mortgage programs and to get an estimate.

The mortgage markets didn’t take Fed Chairman Ben Bernanke’s comments last week well. After Bernanke said that if the economy continued to recover the Fed would like to start tapering off its $85 billion per month bond and mortgage-backed securities purchase program (aka QE2), the markets reacted quickly and the result was mortgage interest rates shot higher Monday. Since then rates have slowly moved lower again though. With any luck this downward trend will continue for several weeks.

If you have considered getting a refinance now is the time to get started. It usually takes a month or more to get to the finish line on a refinance so with any luck rates could be better by a month from now. Keep in mind that while rates might drift lower again this summer, the writing is on the wall that they will be trending higher over the next year or two so getting refinances going now is prudent. Contact us in the sidebar to learn more.

Housing prices are increasing all across America in 2013. That is good news for sellers and buyers. For sellers, it is obviously good news because they can make more on their home sale. But for buyers it is also good news because the asset they are purchasing is likely to be worth more later on than it is now.

Housing has historically been a reliable investment because home values have traditionally slowly increased over time. Of course the bursting of the housing bubble in 2007 proved that housing won’t always go up. But six years later the housing market appears to be back on the march upward again. That means people who buy homes now can feel relatively confident that their home will be increasing in value in the years they own it.

Interest rates for government-backed mortgages are still very low by any historical measure. So if you have considered a home purchase, now is an excellent time to get the process started. Contact us in the sidebar to get more info on the available government backed home purchase mortgage programs.

The Fed held its June meeting yesterday and afterwards Chairman Bernanke confirmed the rumors that had been swirling around for weeks — the Fed is planning to take its foot off the gas later this year when it comes to compressing mortgage interest rates. The markets predictably reacted quickly and as a result mortgage interest rates have moved higher. It appears that the days of 30 year fixed mortgage rates breaking all time lows may be gone for good, barring a reversal from the Fed of some kind.

The good news is that rates on 30 year fixed mortgages are not too far from all time lows still. But there is a growing consensus among pundits that the trend is moving higher and that we could see those 30 year fixed rates rates back up in the 5’s by the end of this year. If you are interested in refinancing or purchasing a home contact us in the sidebar right away.

After dipping to near record lows again in April, mortgage interest rates have jumped to levels not seen in more than a year. Borrowers who are hoping rates will dip down toward those record lows again will probably find themselves disappointed. With hints from the Federal Reserve that their aggressive treasuries and mortgage-backed securities purchase program may be tapering soon, mortgage interest rates are up about half a percentage point in the last month or so. And odds that rates will move higher going forward appear higher than the odds of rates significantly lowering again.

The good news is that rates are still very, very low from a historical perspective. Just a few years ago the average 30 year fixed mortgage was in the low to mid 6’s. This month the average 30 year fixed mortgage is still in the low to mid 4’s. The important thing for borrowers to recognize is that the longer they wait to refinance or purchase a home, the greater their risk will be of missing these historic low rates entirely.

Contact us in the sidebar right away to get an estimate on a government-backed mortgage. Rates are still very low by any historical measure but there is no telling how long these low rates will be available.

Homeowners who are looking to refinance have a bad habit is missing record lows on interest rates. Some miss the lows out of pure bad luck. But some miss them because they misunderstand the process of refinancing a mortgage. Getting to the point where you are ready to lock an interest rate often takes weeks after estimates are sent, applications are started, disclosures are sent and signed and returned, and other documents are gathered. People who watch rates daily and decide to start an application after rates have dipped often find that they are not ready to lock their rate in until weeks later anyway. A better approach is to get the refinance process started and watch rates as the file moves through the processing and underwriting queues. That way borrowers can lock for 30 days or sometimes 15 days and get even better rates. There is nothing wrong with getting your loan ready to go and then locking and closing late in the process — especially if rates are trending lower as they have been the last few days after spiking last Tuesday. The value to that approach in times like these, where rates appear to be inching lower again, is borrowers will be ready to close as soon as rates dip again (assuming they do dip again).

If you have been considering a refinance contact us in the sidebar today to get more information and/or an estimate. Rates are unpredictable but there is value in being ready to jump at the right time.

Mortgage interest rates started increasing about a month ago and have yet to stop their ascent. For folks who are currently in adjustable rate mortgages (ARM’s) and intend to continue owning their home for years to come, the time might finally be here to get into a fixed rate mortgage.

The value of ARMs

Adjustable rate mortgages got a bad rap after the housing crash. Too many borrowers got into adjustable rate mortgages without fully comprehending how much their payments might increase when the rates started adjusting. But the truth is ARM’s are a terrific tool for folks who intend to own the home for only a few years. For those owners there is no reason to pay a premium for a 30 year fixed rate when they fully intend to sell in 5-7 years.

Milking the low rates

Huge numbers of borrowers in the U.S. are currently in adjustable rate mortgages that already started adjusting. In many of these cases these borrowers discovered that when their loans started adjusting their payments dropped over the last few years as a result of the federal government compressing mortgage interest rates. For those borrowers it hasn’t made a lot of sense to refinance into a fixed rate because doing so would increase their payments.

But this jump in rates in the last month might mean those record low rates will be a thing of the past. Rates are still very low by any historical measure, but they are up 0.5-0.75% since April.

The time has come

If you are in an ARM now and intend to own your home for several more years contact us in the sidebar right away. There is no telling how much higher rates will go as the economy continues to improve. Rates are still near the all time lows so now is the time to lock in a low fixed rate.

As the US stock market breaks new record highs mortgage interest rates have been moving higher over the last several weeks as well. The more popular stocks become with investors the less popular US treasury bonds become and when investors sell treasury bonds mortgage interest rates normally begin moving higher. It comes as no surprise that mortgage interest rates are off their recent all time lows. Everyone knew those record lows could not persist forever. The good news is that for now interest rates are still near all time lows so it is not too late to refinance or purchase a home at these astonishingly low rates. Contact us in the sidebar to get more information and/or an estimate on a government backed mortgage right away. There is still time to get in on the low interest rate bonanza that so many borrowers have already taken advantage of.

The past year has been a good one for home values in the US. Values of homes across the country have finally begun increasing after going into a free fall in 2007. Increasing home values is not necessarily great news for home buyers but it is terrific news for folks who would like to refinance to a lower interest rate. Homeowners who currently have mortgage insurance (pmi) with their mortgage stand to benefit the most from rising home values. When a homeowner has at least 20% equity in their homes they can refinance into a conventional Fannie Mae or Freddie Mac mortgage with no mortgage insurance. It behooves anyone who has mortgage insurance now — including folks with FHA loans — to investigate the current value of their home and see if they can refinance and drop their PMI entirely.

Contact us in the sidebar to get more information on the current value of your home. Our counselors have several tools that help them estimate the current value of homes. In some cases values have increased enough to allow borrowers with mortgage insurance to refinance and drop that pmi. Dropping pmi and lowering interest rates can lead to big monthly savings for families.

FHA loans have many benefits. They tend to have great rates and they are often the best option for families who don’t have a lot of money to put down when purchasing a home. However FHA loans also have mortgage insurance. The FHA keeps itself funded using the mortgage insurance fees it collects from borrowers. So the question that many borrowers who have FHA loans ask is, when and how can I drop this FHA mortgage insurance? Here are some answers:

When can I drop my FHA pmi?: Within the first five years of having an FHA loan the only way to get rid of PMI is to refinance to a conventional mortgage. And that only will work if the you have built up more than 20% equity. If lack 20% equity you would still need mortgage insurance with a conventional loan. The FHA currently has a minimum 5 year term on FHA mortgage insurance regardless of how much equity is built up in that time. In markets where housing values are not increasing quickly that normally means borrowers are best off just waiting. But housing values are starting to increase quickly in some areas of the country so in some cases borrowers are building up 20% equity in just a couple of years. If you have an FHA loan now and believe you might have more that 20% equity in your home contact us in the sidebar.

Note: This five year rule applies to current FHA loans. Starting in June 2013 the FHA will be making their pmi last for the life of the loan on all new FHA refinances or purchases.

How do I get rid of my FHA pmi?: After 5 years the FHA mortgage insurance should drop off automatically IF the principal balance is down to 78% of the value the FHA has on record for the home. That last part in important. Here is an example: Lets’ say a home was purchased in 2010 for $250,000 and was appraised at about the same value at the time. The FHA will have that $250,000 value on record and the balance of the loan would have to be 22% less than that (about $195,000) for the mortgage insurance to automatically drop off after 5 years. This would be true even if the home could appraise for more today. For instance, even if that home could appraise for $325,000 today the FHA still uses the original $250,000 value when determining when to automatically drop their mortgage insurance.

Again, in areas where home values are increasing it might make sense to refinance out of the FHA loan to get rid of the PMI rather than wait the 5-10 years for it to drop off on its own. Contact us if you have an FHA loan and think you might have 20% equity in your home soon. Rates on Fannie Mae loans with no PMI are excellent right now and could be very worth your while.

Freddie Mac is reporting that rates on 15 year mortgages and 5 year ARM’s are hitting new all time lows this week. The previous record low rates on these two mortgage products happened last November. Rates on 30 year fixed and other mortgage types did not break new record lows but are near the all time lows this week.

15 year mortgages are not for everyone but have some major advantages for families who can afford higher monthly payments. The primary advantage of a getting 15 year mortgage, besides the obvious benefit of paying off twice as fast as a 30 year loan, is that rates on 15 year mortgage tend to be at least a half a percent better than rates on 30 year mortgages. So over the life of the loan people with a 15 year mortgage pay much less in interest. The downside to 15 year mortgages is that payments tend to be significantly higher than the same loan amount being paid off over 30 year. Here is an example:

– The principal and interest payment on a $200,000 loan over 30 years at 3.5% would be about $898/month
– The principal and interest payment on a $200,000 loan over 15 years at 2.75% would be about $1357/month

So despite the 15 year rate being 3/4 of a percent lower in the above example, the minimum monthly payment is still nearly $460 higher. For a family that could easily afford the extra $460 or so per month the 15 year mortgage makes great sense in the long run. For families that don’t have that kind of extra monthly cash, a 30 year loan probably still makes sense.

The other thing to consider is that on a 30 year fixed loan there is virtually never a prepayment penalty. So a family with a 30 year loan could always pay ahead and still knock their mortgage out in less than 30 years if they wanted. The advantage of voluntarily paying ahead every month on a 30 year loan is if there comes a time when money gets tight you can go back to the minimum payment. With 15 year mortgages that higher payment is due every month regardless of income fluctuations.

Record lows on mortgage interest rates, by definition, are very rare. Contact us in the sidebar today to get a refinance estimate for your home.

Recent shifts in the stock market have sent more and more investors back into the safety of government bonds. The increased popularity of US bonds has pushed yields on those bonds lower and mortgage interest rates have followed. The yield on the 10 year T-Note closed at about 30 basis points lower than its 2013 highs from about a month ago. That means that mortgage interest rates are about a quarter percent better now than they were in mid March. Yields on US bonds are not quite at the all time lows they hit last November but they are getting in the same ballpark again.

If you have considered refinancing contact us in the sidebar immediately. When the trends on rates are moving in the right direction it is an excellent time to start a refinance. There are several government refinance programs that are up and running now that have proven extremely helpful to millions of American homeowners already. The Obama administration has extended and enhanced some of these programs, such as the HARP program and the FHA streamline program, to make them even more beneficial to borrowers. Contact us in the form on the right to learn more.