In today’s competitive housing market, we are seeing more buyers using “all cash” to purchase their homes. Delayed financing allows home buyers who pay cash for a home to obtain cash out, using a refinance, without it being priced or treated as a “cash out” refi. A “cash-out” refi has stricter requirements, including having to wait 6 months after closing before being able to refi, lower loan to value requirements and “cash out” refi’s have higher pricing than a “rate term” refi. Delayed financing allows home owners to recoup the cash used to purchase the home at current rates and terms as a “rate-term” refi.
HUD recently reduced annual mortgage insurance premiums for FHA 30 year fixed rate mortgages by 50 basis points. The annual mortgage insurance premium is part of the monthly mortgage payment and 50 basis is a dramatic reduction. If you have a $400,000 loan amount, this is a monthly savings of $166.67 (400,000 x 0.50% divided by 12 months).
The other day, Get Rich Slowly published 14 Smart Money Moves to Make Before the End of the Year which I liked enough to share on my Facebook page and to also included here on my blog. There are a couple “smart money moves” that are missing on this post that I would like to suggest for home owners.
The greater Seattle – Bellevue competitive housing markets have been experiencing a higher amount of buyers paying “all cash” for homes. Refinancing after you’ve paid cash for a home is also referred to as “delayed financing”. Delayed financing may also take place when a person is buying a foreclosed home at auction at the court house. Historically, “all-cash” buyers who want to refinance after closing to re-coup the cash they used to purchase their homes had to wait six months after the purchase before they can do a “cash-out” refi. Now, home buyers who used “all-cash” to buy their home no longer have to wait months to refinance to get their cash back.
According 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”?
With 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.
HARP (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).
Over 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.