This week is JOBS week and we’ll see how it plays out for mortgage rates.
If you would like to see mortgage rates for your personal scenario, click here!
Mortgage Market Update for the week of September 3, 2024
September 3, 2024 by Leave a Comment
It could be time to refi!
June 3, 2019 by Leave a Comment
M
ortgage rates for a 30 year fixed conventional mortgage are back to very low levels. This is largely due to current global concerns which may create a opportunity of opportunity for those who may benefit from a refinance.
It may make sense for you to refi if: [Read more…]
Fannie Mae updates underwriting guidelines at the end of this month
July 12, 2017 by Leave a Comment
Effective July 29, 2017, Fannie Mae will release DU Version 10.1, packed full to changes to their underwriting guidelines. These changes apply to Fannie Mae conforming mortgages (Freddie Mac has different guidelines). Here are some of updates effective at the end of this month:
50% Debt-to-Income Ratios. [Read more…]
Fannie Mae’s HomeReady Mortgage
April 13, 2016 by 1 Comment
The HomeReady Mortgage is a mortgage program created by Fannie Mae intended to help low-to-moderate income borrowers with good credit buy or refinance a home.
Here are more details about the HomeReady Mortgage:
The 10/1 ARM (Adjustable Rate Mortgage)
June 16, 2014 by 1 Comment
A 10/1 ARM is an adjustable rate mortgage where the interest rate is fixed for the first 10 years and then may adjust at the 121st payment (after the 10 year “fixed period” is over).
After the first adjustment on the 121st month, the rate will adjust annually on the anniversary of the first adjustment date.
The 7/1 ARM
June 26, 2013 by Leave a Comment
With the 30 year fixed rate trending higher over the past few weeks, some may be considering an adjustable rate mortgage (ARM) for the lower rate. An ARM may be worth your consideration if you are planning on not retaining the home or mortgage for longer than the initial fixed period. When contemplating an ARM, you should also factor the CAPS which limit how much the rate can adjust when the fixed period is over and on future adjustment dates.
In today’s post, we’ll compare the 7/1 adjustable rate mortgages to a 30 year fixed – please remember that the rates quoted below are subject to change… and they WILL change (probably before I’m able to publish my post). For your personal rate quote for your home located anywhere in Washington, please click here.
The 7/1 adjustable rate mortgage has a fixed rate for seven years. After 84 months, the rate may adjust up or down no more than 5% (this is the first “cap”). The highest or lowest the rate may ever adjust in it’s lifetime is limited by 5%. After the first adjustment, at 84 months, the rate is fixed for 12 months and then may adjust up or down annually, on the anniversary of the first adjustment date, no more than 2%. The annual adjustments are limited by the lifetime cap and by the “floor” (the very lowest the rate can adjust).
Rates quoted are as of 7:30 am, June 26, 2013 and are based on a loan amount of $400,000 with a loan to value of 80% and credit scores of 740 or higher for a purchase in Seattle closing by July 31, 2013.
30 year fixed rate: 4.500% (apr 4. 658%) priced with 0.981 discount points.
- Principal and interest payment: $2,026.74
- Principal balance at 7 years: $348,105.21
- Principal and interest paid at 7 years: $170,246
- Principal balance at 10 years: $320,357.88
- Principal and interest paid at 10 years: $243,208
7/1 adjustable rate: 3.875% (apr 3.683%) priced with 0.883 discount points. The highest the rate can ever be for the life of the loan is 8.875% (5 percent cap plus 3.875% note rate). The lowest the rate can ever be is 2.25% (the margin). The margin is added to the current index (LIBOR) at the time of adjustment to determine the new rate, subject to the limits of the caps. As of today, the 12 month LIBOR is 0.688.
- Principal and interest (P&I) payment: $1,880.95
- Principal balance at 7 years: $343,240.85
- Principal and interest paid at 7 years: $158,000
- P&I at first adjustment period (month 85): WORSE CASE – rate adjust up to 8.875% with P&I of $2,920.71. BEST CASE: rate drops to the floor of 2.250% with P&I of $1,767.41.
- Principal balance at 10 years: WORSE CASE is $327,543.74. BEST CASE is $311,605.70
- Principal and interest paid at 10 years: $263,145 assuming worse case adjustments or $221,627 assuming best case adjustments.
Here is the Fed’s booklet about adjustable rate mortgages, which I encourage you to read if you are considering an ARM.
If you are considering buying or refinancing your home located in Pasco, Puyallup, Port Angeles or anywhere in Washington state, I’m happy to help you!
Clark Howard Suggests 5/1 ARMs for Refinancing
June 15, 2011 by Leave a Comment
Yesterday morning on CNN, "Money Expert" Clark Howard recommended that home owners who are considering selling their home in the next five years investigate refinancing into a 5/1 adjustable rate mortgage. Why would he suggest such a "risky" product? Interest rates for adjustable rate mortgages are extremely low right now and if you're not going to have the home for more than 5 years, you could save a significant amount of money.
I will be using worse case adjustments for this post, assuming that the index (12 months LIBOR) has climbed incredible to where the the rates have hit the lifetime caps (ceiling) of 5% at the first adjustment and have remained their at each adjustment. The 12 months LIBOR is incredibly low right now and those who have ARMs setting at their first adjustment are probably in a good position.
These rates as of June 15, 2011 at 10:30 am based on 740 or higher credit scores and a loan to value of 80% or lower. NOTE: We do have several programs available if for Seattle area home owners who have diminished home equity. This scenario is based on a rate-term owner-occupied refinance and a loan amount of $327,500.
3.00% for a 5/1 ARM (fixed at 3.00% for 60 months) with a principal and interest (p&i) payment of $1,381. APR 3.285. The "caps" that limit how much this rate can adjust are 5/2/5 so the highest this rate can ever be is 8.00% (worse case scenario) and the lowest is the margin (2.25%).
- At 61 months, assuming worse case scenario, the rate would adjust to 8.000% with a p&i of $2248 and an approx. principal balance of $291,600.
- At 85 months, assuming worse case scenario, the rate would still be 8.000% with a p&i of $2248 and an approx. principal balance of $283,228.
3.375% for a 7/1 ARM (fixed at 3.375% for 84 months) with a p&i payment of $1,448. APR 3.417. The highest this rate could ever be with 5/2/5 caps is 8.375% at the 85th payment and the lowest is the margin of 2.25%.
- At 61 months, the rate is still 3.375% with the same payment of $1448 and the balance is approx. $293,122.
- At 85 months, assuming worse case scenario, the rate would adjust to 8.375% with a p&i of $2270 and an estimated balance of $277,650.
4.500% for a 30 year fixed rate with a principal and interest payment of $1,659 for the entire term of the mortgage.
- At 61 months, the balance is approx. $298,500.
- At 85 months, the balance is approx. $285,000.
NOTE: the above rates are from June 2011 – if you would like a mortgage rate quote based on current pricing for your Washington home, click here.
What is crucial when selecting your mortgage is considering what your financial goals are. If you're not certain that you'll be selling your home in 5 years and you do not want to risk the adjustment that will take place in 61 months, you might want to consider the 7/1 ARM, which will "buy" you two more years of a fixed period for a slightly higher rate. If having an adjustable rate mortgage is going to keep you up worrying at nights, than a fixed product, like the 30 year or 15 year is probably a better option for you. If an adjustable rate mortgage is suitable for your financial scenario, the savings can really add up.
Personally, if you're considering an adjustable rate mortgage, I would recommend seriously considering the next longest term just to "buy" some wiggle room. I was honestly a little surprised that Clark Howard was pushing a 5/1 ARM when the 7/1 is currently just a little higher. Whatever choice is made, it belongs to the home owner and it is their responsibility to understand the risk, rewards and terms of what ever mortgage product they select.
If you have questions about mortgages for homes located anywhere in Washington, please contact me. By the way, if your mortgage originator is no longer in the business (many have found new careers with the higher standards now required), I'm happy to adopt your mortgage – no refinance or transaction is required - your mortgage does need to be on a home located in Washington.
FHA 5/1 Adjustable Rate Mortgage
February 2, 2011 by Leave a Comment
FHA ARMs are extra special in my eyes. I like that they have very low caps limiting how much they can adjust after the fixed rate period is over. Plus, FHA loans may be assumable to a qualified borrower in the future should you decide to sell your home. Today's fixed rates have about a 1 point difference between a 30 year and a 5/1 ARM, but with a 1% rate cap, worse case scenario, the 5/1 ARM will reach today's 30 year fixed rate at it's first adjustment and keep that adjusted rate for one year. Let's see how this pencils out.
NOTE: for a current rate quote for an FHA ARM or any mortgage for a home located in Washington, click here.
As of 12:45 p.m. Feb. 2, 2011, based on a credit score of 720 with a sales price of $400,000 and a down payment of 3.5%, I would quote the following:
30 year fixed FHA with zero points: 4.750% (APR 5.497). Principal, interest and mortgage insurance payment: $2,321.16. ($2033.69 plus $287.08 monthly mortgage insurance).
5/1 FHA ARM with zero points: 3.750% (APR 6.521). Principal, interest and mortgage insurance payment: $2,082.58. ($1805.50 plus $287.08 monthly m.i.).
Based on this pricing, the difference in monthly savings with the ARM is $238.56. Over five years, the savings is about $14,315.
The FHA 5/1 ARM has caps of 1/1/5. This means that the most this rate can adjust on the first adjustment date (after 60 months) is up or down 1%. Using the scenario above, the highest the rate can adjust to is 4.75% and the lowest is 2.75%. The rate will continue to adjust annually no more than 1% up or down for the remainder of the term or as long as the mortgage is retained. The highest the rate can ever be 5% higher than the note rate (this is called the "ceiling"). With this scenario, that would be 8.750%; however it would take 5 years (after the five year fixed period is over) for the rate to adjust that high.
Here's what the principal, interest and mortgage insurance (PIMI) would look like "worst case" scenario assuming your first payment is made today and the rate only adjusts upwards:
PIMI Payments from 2/1/11 – 1/1/16 at $2,082.58 at 3.750%. (Rate fixed for 5 years).
PIMI Payments from 2/1/16 – 1/1/17 at $2,259.96 at 4.750%. (Maximum increase in rate of 1%).
PIMI Payments from 2/1/17 – 1/1/18 at $2,454.06 at 5.750%.
PIMI Payments from 2/1/18 – 1/1/19 at $2,650.82 at 6.750%.
PIMI Payment from 2/1/19 – 1/1/20 at $2,849.23 at 7.750%.
MI Payment (see NOTE below) from 2/1/2020 to 1/1/2021 at $2,818.20 at 8.750% $310,638.
The rate will continue to adjust annually (on the anniversary date of the first adjustment) and will be reamortized based on the remaining term. The rate can adjust by as little as 0.125% but never more than by 1% up or down and never higher than 5% of the Note rate.
NOTE: FHA monthly mortgage insurance drops off after the loan balance reaches 78% of the value (based on the original value of $400,000 = $312,000) and a minimum of 60 payments have been made. Assuming all payments are made as scheduled, the home owner will reach 78% around 108 payments (9 years) with the adjustable rate mortgage. With the 30 year fixed rate, it will actually take closer to 120 months (10 years) to reach the 78% threshold before the monthly mortgage insurance drops from the payment. Additional payments can be made towards principal but the earliest the mi will be removed regardless of loan to value is 60 months.
The scenarios above are assuming that we finance the upfront mortgage insurance premium of 1%. Another option is for the 1% to not be financed and paid as a closing cost…even the seller can pay for the upfront mortgage insurance premium. At this point, Sellers can still contribute up to 6% of the sales price towards closing costs and prepaids; they cannot pay any of the down payment.
Although my quote was based on a 720 mid-credit score. We're currently approving FHA loans with low mid-credit scores down to 640.
The loan limits for FHA loans in King, Pierce and Snohomish County is currently $567,500 (until October 1, 2011).
Is an adjustable rate mortgage right for you? It depends on your personal scenario is and if you can stomach having your rate change. The 1/1/5 caps are certainly more tolerable than the 5/2/5 caps that most conventional ARMS tend ot have. At any rate, it's good to know what your mortgage options are.
If you are considering buying or refinancing a home located in Washington state, I'm happy to help you!
Recent Comments