Announcing the New & Improved Home Affordable Refinance Program (HARP 2.0)

October 24, 2011 by Leave a Comment

We've been waiting to see what the "new Obama refi program" would be and this morning, the Federal Housing Finance Agency published a news release announcing new changes with the goal of reaching more borrowers. Home Affordable refinances are available to home owners who have a mortgage that is securitized by Fannie Mae or Freddie Mac on or before May 31, 2009. 

Here are some of the changes that are being made to HARP:

  • Removing the 125% loan to value ceiling for fixed rate mortgages. If refinancing into an adjustable rate mortgage there is a 105% cap.
  • Eliminating the appraisal where there is reliable AVM estimate available. Currently some Fannie Mae HARP refi's have qualified to have appraisals waived, it appears this may become more of the norm with HARP refi's.
  • Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and reducing fees for other borrowers;
  • Extending the end date of HARP until December 31, 2013 for loan originally sold to Fannie or Freddie on or before May 31, 2009 (note – the date a loan was sold to Fannie or Freddie is different than the date you closed on your refinance).

Borrowers must be current on their mortgage payments with no late payments in the past 6 months an do not have more than one late payment in the past 12 months.

HARP refinances are available for single family dwellings and condos as well as owner occupied, second homes and investment properties.

You DO NOT have to use your current mortgage servicer (who you currently make your mortgage payments to) for your Home Affordable Refinance unless you currently have private mortgage insurance. If your home is located anywhere in Washington State, I can help you with your mortgage needs.

If you have been turned down for a Home Affordable refinance because of a low appraised value and you otherwise qualified – this is your second chance!

More information is to be available by November 15, 2011.  Stay tuned!

UPDATE: Here are some tips for preparing for your HARP 2.0 refinance BEFORE you apply.

Filed Under: Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance

Private Mortgage Insurance Saves the Day for Refi’s with Low Appraisals

October 5, 2011 by 1 Comment

Recently a couple of my clients returned to me to refinance their Washington homes wanting to take advantage of the current historically low mortgage rates. The biggest gamble with a refinance is what the appraised value comes in at. We know at the beginning of the application if someone is qualified based on their income and what their credit scores are. We wait to until we receive the appraisal to learn what has been decided to be a current value based on what other like homes in the neighborhood have recently sold for.  If a home's loan to value is over 80% based on the the appraised value, the home owner has options depending on what the actual loan to value is. 

Private mortgage insurance has varying rates depending on risk factors, such as credit score, appraised value, loan program and income. The premium can be paid monthly, annually, by the lender (lpmi), single premium (paid once) or split premiums (a combination of monthly and a lump sum premium). If paid monthly, private mortgage insurance is set to be dropped from ones mortgage payment when the principal balance reaches 78% loan to value based on the original transaction.

Here's an example. A couple from Ballard want to refinance their mortgage with a total loan amount of $400,000 with no cash out (rate-term refi).  They have excellent credit scores (above 740) and have locked in a 30 year fixed at 3.875% (apr 3.978) with a principal and interest payment of $1881.  Mr and Mrs. Ballard would like the appraisal to come in at $500,000 or higher to meet the 80% loan to value criteria. Based on what their neighbors have sold their homes for recently (6-9 months) the appraisal comes in at $480,000 producing an 83.3% loan to value. It's disappointing at first however Mr. and Mrs. Ballard and ready to review what their possible options are. 

Bring in cash to make up the difference. $480,000 appraised value x 80% LTV = $384,000 possible loan amount with no mortgage insurance.  $400,000 proposed loan less $384,000 = roughly $16,000.  NOTE: this figure could probably be reduced with the use of rebate pricing (increasing the rate to reduce the cost) and other closing costs would be reduced based on the reduction of loan amount.

Add monthly private mortgage insurance. Based on their scenario, the rate would be 0.29% of the loan amount divided by 12 months = $96.67 monthly pmi. This premium will remain in their payment until the principal balance reaches 78% of the appraised value of $480,000, which should take approximately 41 months. If Mr. and Mrs. Ballard decides to go this route, their principal, interest and mortgage insurance payment will be $1978 and their initial closing cost will not be increased (apr 4.056). 

Pay a one time "single premium" mortgage insurance. Instead of increasing their monthly payment, Mr. and Mrs. Ballard can opt to pay pmi in one lump sum and be done with it!  The rate, based on their scenario, is 0.72% of the loan amount = a one time payment of $2880. This does increase their closing cost however their principal and interest payment will remain at $1881 (apr 4.039).

Mr. and Mrs. Ballard decide they like the single premium option considering that they won't have a mortgage payment due for one month after the closing of their new refinance and they're receiving a refund of the balance of their existing reserve account a few weeks after closing from their existing mortgage servicer.  Plus they'll break even with the one time mortgage insurance premium quicker than the monthly option. Both pmi options allow them to not dip into their cash reserves and to still proceed with the refinance.

In this climate, sometimes neighbors (or banks) have to sell homes for less than what they or you would like and appraisals may come in lower than expected.  It's good to know that there are options for when this happens. A piggy back second mortgage may be something to consider too with this type of scenario.

NOTE: If Mr. and Mrs. Ballard's existing mortgage qualified for a Home Affordable Refinance, there would not be any private mortgage insurance required and if their exisiting mortgage was FHA, they may have opted for a streamlined refinance without an appraisal (no potential loan to value issues) although the pmi rate is currently less expensive than FHA's mortgage insurance.

PS: For the record, appraisals may come in higher than estimated too. 

If you are interested in seeing obtaining a rate quote for a refinance or purchase on a home located anywhere in Washington, please contact me.

Filed Under: Appraisals, Mortgage Insurance, Refinance

Refinancing Your Seattle Area “High Balance” Mortgage Over $506,000

October 4, 2011 by Leave a Comment

If you obtained a high balance mortgage over the current limit ($506,000 in King, Pierce and Snohomish Counties) and missed the opportunity to refinance before the loan amounts were reduced, you may still have some options worth checking out. Especially with Fannie Mae hinting that loan limits may be reduced further in just a few months, effective January 1, 2012. FHA loan limits may be further reduced in 2012 as well. We typically learn what 2012 limits will be in November.  The gap between yesterday's higher loan limits and conforming/FHA loan limits may actually widen in a few months making most of these scenarios tougher to obtain in 2012.

Conventional Financing

Consider a Jumbo/Non-Conforming Mortgage. Fixed rates or adjustable rate mortgages may be worth your consideration depending on your financial plans. Non-conforming mortgages are for well qualified borrowers and require a minimum credit score of 720 and a maximum loan to value of 80%. Loan amounts of $506,001 and higher are now considered a jumbo in King County as well as Snohomish and Pierce.

Cash In Refinance. Not happy with how your investments are doing in the stock market? Some home owners are electing to use their savings or investments in to bring their principal balance down to the conforming loan limit.

Piggy Back Second Mortgage.  We currently are able to go up to 85% of the appraised value with a second mortgage.  The loan amounts can be structured to keep the first mortgage at 80% of the loan to value and/or at the county high balance conforming limit. Home owners need to be well qualified with credit scores of 720 or higher.  HELOCs and amortized fixed rates are available.

FHA Loans. If your existing mortgage is an FHA loan, you may be in luck. Although FHA loan limits were reduced on October 1, they are allowing streamline refinances of the former temporary higher loan limits.  UPDATE: FHA LOAN LIMITS FROM NOV 18, 2011 – DECEMBER 2012 ARE $567,500 IN KING, PIERCE AND SNOHOMISH COUNTY.

VA Mortgage Loans. Unlike conforming and FHA loans, VA elected to not reduce their loan limits (technically the guarantee) for the remainder of 2011.  

With mortgage rates at a historic lows, it may be worth your time to contact a licensed mortgage originator to review your options. Whether or not you should refinance depends on your personal goals and financial scenario.  If your home is located anywhere in Washington, I'm happy to provide you detailed written rate quotes with no obligation.

Filed Under: Fannie, Freddie and FHFA, FHA, Refinance, VA Mortgage Loans Tagged With: , , ,

Chasing Last Week’s Mortgage Rates | How Rates Change

August 23, 2011 by Leave a Comment

Yesterday, a Seattle area homeowner I’ve been providing rate quotes to told me they’d like to lock if they could have the rate quote I provided him last week when mortgage rates were at an all time low.  Six months ago, there would be a greater possibility that I would be able to offer her the same rate at the same price as last week prior to the Fed’s ruling on how mortgage originators are compensated (referred to as LO Comp).

LO Comp has done two things:

[Read more…]

Filed Under: Interest Rates, Refinance Tagged With: ,

Should You Pay Your Mortgage Off Quicker

July 1, 2011 by Leave a Comment

Earlier this week, The Seattle Times published with tips for "paring down your mortgage" siting that many home owners are opting to pay off their mortgages quicker:

The portion of borrowers refinancing in January who took 15-year mortgages rose to 29 percent from 11 percent two years earlier, according to the most recent data available from CoreLogic, a real-estate information firm in Santa Ana, Calif. Mortgages with 30-year terms accounted for 52 percent of refinancings in January, down from 80 percent in January 2009.

The share of cash-in refinancings reached a record 44 percent in the fourth quarter, according to data from Freddie Mac dating to 1985. While the share fell to 21 percent in the first quarter as mortgage rates climbed, it was almost double the quarterly average over the past 26 years.

I've noticed a much healthier, financially responsible "attitude" with my clients over this past year. Instead of home buyers wanting to know "how much" they can buy, they want to know what a certain payment will qualify them for.  There's a definite trend where folks are buying less than what they could be preapproved for.  

Many are considering shorter terms, as the Seattle Times article mentions, including the 15 year and 10 year amortized mortgage (which is being heavily advertised on the radio).  I caution to make sure you have plenty of reserves if you opt for a shorter term mortgage…you can always pay shorten the term of a 30 year mortgage and have the flexibility of only making the 30 year amortized payment; but should you find yourself needing more cash flow in the future, you cannot make a 30 year payment on a 20, 15 or 10 year amortized mortgage.  And should you find yourself in a financial squeeze in the future, you may not qualify to refinance into a longer term.

30 Year Fixed:  4.625% (apr 4.790) with a principal and interest payment of $2057.

20 Year Fixed:  4.500% (apr 4.679) with a principal and interest payment of $2531.

15 Year Fixed:  3.750% (apr 3.995) with a principal and interest payment of $2909.

10 Year Fixed:  3.500% (apr 3.808) with a principal and interest payment of $3955.

The savings over the life of the loan is great…but if you're having to refinance to obtain cash back or to reduce your payment or if you're relying on your credit cards, you may want to seriously consider a longer term mortgage.  You can reduce the interest you pay by making additional payments towards your principal.

Cash-in refinances are continuing to be popular as many home owners are wanting to take advantage of the lower rates that are available with conforming and conforming high balance loan limits.  This has become more of a phenomenon with the loan limits set to be reduced from $567,500 to $506,000 as of October 1, 2011 in the Seattle area for both FHA and Conforming loans and possible reduced lower effective January 1, 2012.

Here's an example of the difference between current conforming high balance and jumbo mortgage rates with a 30 year fixed in greater Seattle:

Conforming High Balance loan amount of $567,500:  4.750% (apr 4.871) principal and interest payment of $2,960.

Non-Conforming Jumbo loan amount of $567,501:  5.375% (apr 5.486) principal and interest  payment of $3,178.

With a cash-in refinance, it's important to weigh the lost opportunity of the cash you're investing into your home (you may not have access to it for quite a while) along with the monthly savings of the refinance.

Adjustable rate mortgages are also gaining in popularity.  If you're not planning on retaining your home for more than five years, it's worth at least comparing the savings.  However if the idea of having a mortgage that will adjust in five, seven or ten years makes you uncomfortable, then you should stick with a fixed rate product.

10/1 ARM:  4.125% (apr 3.911). Interest rate fixed for 120 months with caps of 5/2/5 and a principal and interest payment of $1,930.  The highest the rate can adjust on the 121st payment is 9.125% and the lowest is 2.25%. 

7/1 ARM:  3.625% (apr 3.537). Interest rate fixed for 84 months with caps of 5/2/5 with a principal and interest payment of $1,852. The highest the rate can adjust on the 85th payment is 8.625% and the lowest is 2.25%.

5/1 ARM: 3.250% (apr 3.359). Interest rate fixed for 60 months with caps of 5/2/5 and a principal and interest payment of $1,714. The highest the rate can adjust to on the 61st payment is 8.250% and the lowest is 2.25%. 

If you have questions or are interested in obtaining a mortgage for a home located anywhere in Washington state, please contact me!  Nothing makes me happier than helping my readers.

Rates quoted above are effective as of July 1, 2011 at 11:45 a.m. and may change at anytime. Rates are based on 740 or higher credit scores with an 80% loan to value for a purchase or rate-term refinance in Washington.

Filed Under: Interest Rates, Refinance

Piggyback Combo Mortgages are Back

June 21, 2011 by Leave a Comment

I’m pleased to announce that we now have second mortgages and home equity loans available in combination with a first mortgage at Mortgage Master Service Corporation. I see this being very useful with keeping loan amounts under conforming limits (especially once they’re scheduled to be reduced on October 1, 2011).  Here’s some quick points on this program:

  • maximum allowed total loan to value is 85% with a mid-credit score of 720 or higher for owner occupied.
  • maximum allowed total loan to value is 70% with a mid-credit score of 700 – 719 for owner occupied.
  • maximum allowed loan to value of 80% with a mid-credit score of 720 or higher for a second home.
  • available for purchases or refinances.
  • maximum allowed debt-to-income ratio of 45%.
  • available as a HELOC (home equity line of credit) or fixed rates.  

Should you consider using a first and second mortgage combo for your home financing? That’s up to you!  What’s important is knowing and understanding what options are available to you so you can make an informed decision.  If you are buying or refinancing a home located anywhere in Washington state, I’m happy to help you with your mortgage needs. 

Filed Under: Home Equity Loans & Second Mortgages, Refinance, Residential Purchase Tagged With: , , ,

Clark Howard Suggests 5/1 ARMs for Refinancing

June 15, 2011 by Leave a Comment

Clark 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.

Filed Under: Adjustable Rate Mortgage (ARM), People, Refinance

How Much Does My Home Need to Appraise with a Refinance?

June 3, 2011 by Leave a Comment

This is a question that I'm reviewing for a client in Seattle who's current mortgage was a non-conforming loan amount in 2005. Non-conforming (aka jumbo) mortgages do not qualify for the home affordable refinance program which offer expanded loan-to-values. The current mortgage balance is $400,000 (in 2005, the conforming loan limit was $359,650). In King County, the current high balance loan limit is $567,500 (soon to be reduced to $506,000 on October 1, 2011).

Here are some examples of what programs are available based on how much the home may appraise for (loan to value) with a mortgage payoff of $400,000.

  • appraised value of $508,000 or higher = 80% loan to value and no private mortgage insurance = conventional mortgage with closing costs and prepaids financed.
  • appraised value of $500,000 or 80% loan to value = conventional mortgage with closing costs and prepaids paid out of pocket or with rebate pricing.
  • appraised value of $475,000 or 85% loan to value = possible combo mortgage with first mortgage at 80% loan to value or lower (to avoid private mortgage insurance) and second mortgage at combined loan to value at 85%. Yes, second mortgages are starting to come back. This scenario would require a minimum mid-credit score of 720.
  • appraised value of $450,000 or 90% loan to value = mortgage insurance
  • appraised value of $415,000 or 97% loan to value = FHA insured mortgage with upfront and annual (monthly) mortgage insurance.
  • appraised value below $415,000 means that the borrower will need to consider a cash-in refinance if they want to proceed.

NOTE: If the mortgage that was being paid off was eligible for home affordable or if it was an FHA underlying mortgage, there would be more options…because it was originally a jumbo loan in 2005, the options are limited.

How much this home appraises for will impact whether or not a refinance is possible…I really believe that if Congress is sincere about a housing recovery, we need to eliminate appraisals on certain rate-term refinance where the borrower qualifes based on their income, employment and credit.

Would you like a mortgage rate quote for your home located anywhere in Washington? Click here.

Filed Under: Appraisals, Refinance
« Previous Page
Next Page »