Another extension for HARP…so what

MortgagePorter-HARP2According to Housing Wire, it looks like HARP (aka the Home Affordable Refinance Program) may once again be extended through 2016. The HARP program was created for home owners who have conventional Fannie Mae or Freddie Mac mortgages and who had lost equity in their homes due to the mortgage meltdown, making it impossible to refinance. With HARP, appraisals are often not required and over the past few years, underwriting guidelines have become more relaxed with this program.  So why the “so what”?

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Is it time to refi your FHA mortgage?

mortgageporter-thinkingWith the appreciation homes are seeing in the greater Seattle – King County area, home owners who purchased their home a couple years ago using an FHA mortgage may now be able to refinance into a conventional mortgage. FHA mortgages are often used when a home buyer needs a lower down payment option or if credit scores are lower. FHA jumbo mortgages offer home buyers lower down payment with higher loan amounts than what conforming mortgages will permit. There are many reasons why someone might opt for an FHA mortgage when buying a home.

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HARP still available

MortgagePorter-HARP2HARP (aka the Home Affordable Refi Program or HARP 2.0) is set to expire at the end of 2015. HARP is a refinance program that was designed to help home owners who have good credit, income and job stability and would qualify for a refi except for the reduced value on their home.

HARP is available to home owners who have a conventional mortgage securitized by Fannie Mae or Freddie Mac (this is different than where you make your mortgage payments to).

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Mortgage Insurance loses tax deduction benefit in 2014

mortgageporterraiseOver the past few years, home owners have enjoyed deducting private mortgage insurance (pmi) premiums from their income tax. This is also true for government forms of mortgage insurance (aka funding fee or guarantee fee) with FHA, VA and USDA mortgage loans. This benefit is coming to an end effective on 2014 tax returns.

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Bad News equals Lower Mortgage Rates

iStock-000012863442XSmallIf there can be one positive tidbit from the government shutdown, it just may be lower mortgage rates. And by the way, we are still originating and closing mortgages during the government shut down. USDA has been reduced to essential functions only and therefore, loans that have not yet been approved USDA may not be closing during this time. However, conventional, FHA and VA loans are available.  Not all lenders are able to operate during the shutdown because of not being able to obtain tax transcripts from the IRS, so please do confirm with your lender whether or not this is an issue for your mortgage scenario. Self employed borrowers may find it more challenging during these times.

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My response to Get Rich Slowly’s “Reader Story: Refinancing in the post financial crisis economy”

A problem the mortgage industry has (one of them) is the perception that consumers have about the mortgage process.

  • Reduced document loans are pretty much gone unless you want to go “hard money”. Even a “streamlined” FHA refinance is not very streamlined – it’s a “full doc” loan minus the appraisal.
  • The lender offering the lowest rate does not mean your loan will close or close smoothly.
  • Borrowers need to pay more attention to the knowledge, expertise and professionalism of the loan officer. This is at least equally as important as trying to find the “lowest mortgage rate” [Read more...]

Seattle Rising Home Prices is Good News for Refinancing

If you have been waiting for Congress to pass HARP 3.0 or have been previously turned down for a refinance because of lost equity in your home, you might consider trying to refinance again.

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Reader Question: Should I Wait to Refi?

One of my returning clients is considering a refinance, however, they’re not sure if they should wait or not.  Their Seattle area home is really close to that magically 80% loan to value – based on best estimates – which would allow them to avoid private mortgage insurance if their home’s value increases.

There are pros and cons to waiting to a refi, similar to those with having an extended closing when you’re buying a home.  Here are a few:

  • changes to home value. Your home’s value may increase as the Seattle markets seems to be doing well with purchase inventory… or a home in the neighborhood that’s a potentially a strong comparable for your appraisal might become a short sale or foreclosure, which may negatively impact your home’s appraised value.
  • changes to employment. If your or your spouse decides to change jobs and it’s not in the same line of work or the new job has a different pay structure, this may impact qualifying.
  • credit scores vary. Credit scores impact the pricing of your rate and underwriting decisions. Lately I’ve been encountering clients who have paid off credit cards and closed them which sounds great, however they now have “shallow credit” and lower credit scores. I’ve also seen late payments on a credit report caused by a parent co-signing for their child. Sometimes it may be worth deciding to delay a refi if you’re trying to improve your scores, or proceeding with the refi and rechecking scores prior to closing.
  • interest rates. Mortgage rates change daily. Sometimes rates change throughout the day. Although it’s anticipated that mortgage rates will remain low for the remainder of the year, members of the Fed have hinted that the Fed should consider no longer buying mortgage backed securities, which has kept rates at their manipulated lower levels. As the economy improves, mortgage rates tend to trend higher.
  • loan programs and guidelines may change. Currently, unless our elected officials take action, HARP 2.0 is set to expire at the end of this year. Banks and lenders currently adjust their underwriting guidelines (aka overlays). And we’re waiting for FHA to increase their mortgage insurance premiums which impacts FHA streamline and non-streamline refi’s. 

Refinancing now is gambling that your home will appraise high enough or you may be out the appraisal fee unless mortgage insurance or a piggy-back second mortgage makes sense to proceed with the refi.

Delaying the refinance adds other potential risk factors assuming you’re satisfied with the current low mortgage rates and you qualify.

I recommend reviewing possible refinance options that are available now and weigh out the pro’s and cons. Refinancing now, should you decide to, also means that you’re reducing your payment and higher interest sooner. 

If you are interested in a mortgage rate quote for your refinance or purchase of a home located anywhere in Washington, click here.  I’m happy to help you!