Is it time for you to refi?

September 28, 2012 by Leave a Comment

Mortgage rates have been at historic lows for quite some time largely due to the Fed’s purchase of mortgage backed securities. Although the Fed is involved with keep rates at artificial lows, mortgage rates are also influenced by other actions.  For example, yesterday we saw some volatility partially caused by bond traders taking profit. The Fed has indicated they will continue the purchase of mortgage backed securities for an extended period of time. So when is it the right time for you to refinance and lock in a rate?

Locking in a mortgage rate means that you have secured a certain rate at a certain cost (or credit) for a specific amount of days. It’s a “rate lock commitment” for the mortgage originator to deliver that loan to the lender. When you have locked in a mortgage rate, assuming the transaction closes in time, you are assured that you have that rate for that time period. If you wind up needing additional time, you may be able to extend the rate lock commitment for a specific period. Although locking at the begin of a transaction provides you peace of mind that you have that low rate; the risk is that rates may improve.

You can also start the refinance process and “float”. This means that you start your loan application and the entire process until you decide to lock in your interest rate. You don’t have to lock in your rate until about 10 days before you closing. With floating your rate, you’re risking rates may deteriorate before you’re able to lock.

In my opinion, rates are at such low levels, it makes sense to lock now. However, if you’re someone who will be disappointed if rates improve by 0.125% and you don’t mind the risk of a higher rate, floating may be better for you.  

Should you refinance? You may want to consider refinancing if:

  • Your current mortgage rate is in the mid-4s or higher and if you have a conforming loan amount, which in the Seattle area is a loan amount of $506,000 or lower. NOTE: some of my clients are doing “cash in” refinances to bring their loan amount down to $506,000.
  • If your loan amount is over $506,000 and under $567,500 in King, Pierce or Snohomish county and your loan to value is around 95%, you may want to consider an FHA jumbo mortgage.  
  • If you are eligible for a HARP 2.0 refinance. Click here to learn more. 
  • If you currently have an FHA insured mortgage, you may be eligible for an FHA streamlined refinance. No appraisal is required with an FHA streamlined refi.
  • If you are considering shortening your mortgage term.
  • If you currently have an adjustable rate mortgage and wish to have a fixed rate mortgage.
  • Create more cash flow for your investment property by reducing the rate. NOTE: Investment property may qualify for HARP 2 or FHA streamlined refi’s 

If your home is located anywhere in Washington state, I’m happy to review your scenario for you to see if it makes sense to refinance now. Click here if you would like me to provide you with a rate quote for your home located in Washington. 

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Fannie Mae and Freddie Mac improve HARP 2.0 Underwriting Guidelines

September 18, 2012 by 2 Comments

On Friday, Fannie Mae and Freddie Mac announced much needed updates to underwriting guidelines for HARP 2.0. The Home Affordable Refinance Program (HARP 2.0) has helped many Washington state homeowners with conforming mortgages (securitized by Fannie Mae or Freddie Mac prior to June 1, 2009) take advantage of historically low mortgage rates regardless of their home’s current equity (or lack thereof). You can learn more about the HARP 2.0 program by clicking here.

The recent updates to HARP 2.0 will allow more home owners to have access to this program by reducing documentation requirements for some borrowers. Here are some of the improvements:

  • Reduced documentation for income and assets. NOTE: Form 4506 and verification of employment will still be required. Lenders will not be required to verify large deposits.
  • Allowing borrowers with assets to not have to document income. This is available when a home owner has at least 12 months of their proposed new mortgage payment (PITI) in savings. The assets may come from checking or savings, stocks or vested retirement accounts.
  • Improvements to when a borrower is removed from the mortgage. Previously if a borrower was being removed with the HARP 2.0 refinance, guidelines required proof that the remaining borrower made the mortgage payments for the last year with their own separate funds (except in the case of death). Now with HARP 2.0, in the remaining borrower can qualify on their own (debt to income at 45% or lower and credit scores of 620 or higher) they may qualify for a HARP 2.0 refinance.

Remember, banks and lenders may layer their own underwriting guidelines to Fannie Mae and Freddie Mac’s HARP 2.0 program.

If you have been turned down for a HARP 2.0 refinance before, it may be worth checking with your local, licensed mortgage originator to see if you are now eligible. HARP 2.0 is available for owner occupied, vacation homes and investment properties.  I can help you if your home is located anywhere in Washington State – click here for your HARP 2.0 rate quote.

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FHA Rate-Term Refi’s may be a Great Option for Higher Loan Amounts

September 6, 2012 by 1 Comment

I have been working with a couple of Seattle area home owners who either have a jumbo mortgage or have a mortgage that used to be “high balance conforming” and were caught “in the gap” when conforming high balance loan limits were rolled back to $506,000 in King County.  A jumbo (aka non-conforming) mortgage is a loan amount over $506,000 in King, Pierce or Snohomish counties for a single family dwelling.

Jumbo mortgages typically require an 80% loan to value for a refinance. This can also cause a challenge if the home has lost equity and the values are “underwater” or above an 80% loan to value. Homeowners with an existing Jumbo mortgage do not qualify for HARP 2.0 since their existing mortgage is not securitized by Fannie Mae or Freddie Mac. Homeowners who have a High Balance Conforming mortgage from prior to to loan limit roll back may qualify for HARP 2.0 – however, their loan limit will be restricted to the current levels ($506,000 in King, Pierce and Snohomish counties) causing them to have to bring “cash in” to close.

One client, let’s call him “Mike in Magnolia”, has a jumbo mortgage at 6.500% with a balance of $640,000 and estimates the value of his Seattle area home to be around $600,000.  He’s really like to refinance and take advantage of the current low mortgage rates.  

One option would be an FHA jumbo which would allow a loan amount up to $567,500. Based on this scenario and pricing as of 1:30pm 9/6/12, his rate would be 3.500% for a 30 year fixed (apr 4.382). This would provide him a PIMI (principal, interest and mortgage insurance) payment of $3,155.46 and cash for closing would be around $78,000. His home could appraise for as low as $585,000 and still have this scenario work at an 97.75% loan to value.

If Mike is willing to bring $142,000 to closing, he could consider a conventional refinance at $506,000. His home would need to appraise for around $600,000. Based on current rates of 3.875% for a 30 year fixed (apr 4.117); his PIMI payment would be $2640.83. His home would need to appraise for at least $600,000 for an 85% loan to value.

I’m working with another client who has a condo in downtown Seattle that has lost value. They obtained their mortgage after May 31, 2009, so it does not qualify for HARP 2.0. The condo IS on HUD’s approved list for FHA financing which will allow them to take advantage of today’s lower FHA mortgage rates with a loan to value of up to 97.75%.

FHA rate-term refinances are a “full doc” loan and will require an appraisal.  FHA mortgages may be assumable to a qualified buyer should these clients decide to sell their homes in the future.

If you’re interested in an FHA mortgage or having me review your scenario for your home located anywhere in Washington state, please contact me.

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The Family Opportunity Mortgage Refinance

August 14, 2012 by 17 Comments

Cheerful woman with family standing in back yard

I’ve written about the Family Opportunity Mortgage for purchases where certain circumstances allow one to obtain a mortgage for a family member who is either a student in college, a disabled adult child or an elderly parent. The Family Opportunity Mortgages allows financing to be treated as a primary residence instead of an investment property as long as the scenario meets certain guidelines.  The Family Opportunity Mortgage is a Fannie Mae/Freddie Mac program that is also available for refi’s! [Read more…]

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FHA Streamlined Refinance: Credit vs Non-Credit Qualifying

July 25, 2012 by 10 Comments

With an FHA streamlined refi, most folks have the misconception due to the program name “streamlined” that the refinances are close very quickly and are a slam dunk with little to no paperwork. While they do close quicker than a typical refinance since more often than not, you’re not waiting on an appraisal, if you’re going for a lower cost or better rate, you’re probably opting for a “credit qualifying” FHA streamlined refi. What’s the difference?

FHA streamlined credit qualifying basically means that the borrower is providing income and asset documents, just like a regular refinance. By providing documentation that shows they actually qualify for the new mortgage, lenders provide preferred pricing. Since it is a “manual” underwrite (a real human is underwriting the loan and not a computer program) the debt to income ratio is limited to 45%.

FHA streamlined non-credit qualifying is when income documentation is not provided and not stated on the loan application. The borrower’s income is not a consideration. Because of the higher risk, the rate or pricing is often slightly higher.

EDITORS NOTE: Rates quoted below are expired (years old!!)…for a current mortgage rate quote for your home in Washington state, click here.

Right now (July 25, 2012 at 11:00 am) I’m working on a quote for an FHA streamlined refinance for a home located in Seattle. The rates quoted below are based on mid credit scores of 680 –  720 with no appraisal and the base loan amount is $289,000.

FHA credit qualifying 30 year fixed: 3.375% (apr 4.548) priced with just over 1 point in rebate credit which will cover closing cost and some of the prepaids/reserves. Principal and interest payment is $1300.01.

FHA non-credit qualifying 30 year fixed: 3.750% (apr 4.934) priced just under 1 point (about 0.25% difference in fee) which covers closing cost and some of the prepaids/reserves. Principal and interest payment is $1361.82.

NOTE: for a current rate quote on a home located anywhere in Washington state, based on today’s pricing and your scenario, click here.

What type of supporting documentation is required?  This is in additional to a complete loan application and credit report.

Non-credit qualifying:

  • Copy of your existing mortgage Note
  • Copy of your mortgage statement (we need to document a “Net Tangible Benefit”)
  • Bank statement (all pages) if funds are due at closing. Large deposits may be required to be documented.
  • Drivers license
  • Social security card
  • Payoff obtained from escrow company documenting that the current month’s mortgage payment has been made

Credit qualifying: all the above, plus…

  • last two years W2s
  • last two years tax returns (if self employed)
  • most recent paystubs documenting 30 days of income
  • most recent bank statements (all pages) documenting at least funds for closing. Large deposits may be required to be documented.

Additional documentation may be required depending on your personal scenario.

Whether you opt for non-credit qualifying or credit qualifying is your choice and depends on your financial scenario. When rates and pricing are the same for both scenarios, most would opt for “non-credit” qualifying. Since recent changes with how HUD prices FHA mortgage insurance for some loans, there has been major changes with which banks are offering FHA streamlines and how they’re pricing them.

If I can help you refinance your FHA loan on your home located anywhere in Washington state, please contact me.

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Should I do an FHA streamline refi if my rate is 4.875%?

July 6, 2012 by 18 Comments

This is a scenario I’m reviewing for one of my clients who lives in Seattle.  His existing mortgage is a 30 year fixed FHA at 4.875%. He closed on this loan after June 1, 2009 so it does not qualify for FHA’s reduced mortgage insurance premiums*. However, he can still take advantage of today’s low mortgage rates as long as the refi meets HUD’s “net tangible benefit” requirements of reducing his payment by at least 5%.

HUD’s Net Tangible Benefit requires that the “PIMI” (principal, interest and mortgage insurance) payment be reduced by at least five percent or the refinance cannot happen. This has been an issue for home owners who would like to refinance from their FHA 30 year fixed to an FHA 15 year fixed as HUD does not make an exception for those who would like to shorten their mortgage term if the payment increases — even if the borrower qualifies with documenting their income (some FHA streamlines do not require income to be documented). 

The Seattle client I’m working with is doing a “credit qualifying” FHA streamline refi for a 30 year fixed.  His current principal and interest is $1171.55 and the monthly mortgage insurance payment is $95.90 for a total PIMI payment of $1,267.45.  His new PIMI payment needs to be less by at least 5% ($63.37) which means his new PIMI needs to be $1,204.08 or lower.

As of 10:00 am this morning (July 6, 2012) I’m quoting 3.375% for a 30 year fixed FHA streamline refi with no appraisal (apr 4.554) with a base loan amount of $212,750.  After his upfront mortgage insruance premium credit from his existing FHA insured loan and interest rate credit, he’ll need to bring in about $1200 at closing. He won’t have a mortgage payment due until a month after closing and receiving a refund of his existing reserve account balance a couple weeks after closing.  

But what about the new PIMI?  Principal and interest is $957.01 and the monthly mortgage insurance is $210.85 for a total PIMI of $1,167.86.  The new refinance meets HUD’s net tangible benefit requirement.  

The Seattle homeowner is reducing their payment by $100 per month. **And after 60 payments and when the loan balance reaches 78% loan to value, the monthly mortgage insurance will terminate.  

**UPDATE 12/19/2012: FHA mortgage insurance will not be cancelled on new mortgages effective January 2013. It will remain on the life of the loan (until it is paid off or refinanced to a non-FHA mortgage).** Read more here.

*NOTE: If the FHA mortgage being refi’d was endorsed by HUD prior to June 1, 2009, the savings would be even greater as it would qualify for reduced mortgage insurance.

If you have an FHA insured mortgage and are interested in an FHA streamlined refinance on your home located anywhere in Washington, please contact me.  I’m happy to help you!

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Has your Bank turned down your refi?

July 5, 2012 by 1 Comment

IStock_000014142621XSmallIn a time when one might assume that their bank would work with them to refinance their home, many Washington homeowners are finding quite the opposite. I’m hearing from local homeowners who have made their mortgage payments on time and who qualify for refinance (income, employment and assets) yet their bank is either unwilling to provide the refinance or is taking several months to close it.

For example, several large banks will only do FHA streamline refinances on mortgages they currently service.  You can have your checking and savings accounts any of these banks, but if they don’t currently service your mortgage, it’s my understanding they will not assist you with your FHA streamlined refinance.  NOTE: We can help you refinancing your FHA streamlined mortgage from any bank as long as your home is located in Washington.  

Banks are also being very selective when it comes to HARP 2.0 (home affordable) refinances. Some are electing not to help mortgages they currently service because of lpmi (lender paid mortgage insurance) or pmi when many of these loans are eligible to refinance. 

Bottom line, if your bank or mortgage servicer has turned down your refinance (or if they’re stalling the process) and your credit, income and assets are good: get a second opinion.  

If your home is located anywhere in Washington state, I’m happy to review your scenario. I’ve been originating and closing refinance and purchase mortgages at Mortgage Master Service Corporation since April 2000. 

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Banks playing hardball with FHA Streamline Refi’s: ACT NOW!!

June 18, 2012 by 3 Comments

No sooner had the reduced MI gone into effect with FHA streamline refinances, some banks announced that they would only provide FHA streamline refinances on mortgages they currently service.  I can understand a bank doing this on the “non-credit qualifying” refinances where borrowers do not document their income or assets, however I have a hard time accepting this when a borrower is doing a full “credit qualifying” FHA streamlined refinance.

By limiting availability of a program to home owners who are ABLE AND WANT to continue to make their mortgage payments and take advantage of the historically low mortgage rates, these banks are hampering the recovery of our housing markets.

Wells Fargo, with a significant market-share of FHA insured loans, was the first bank to come out with this announcement. If you have an FHA mortgage with Wells Fargo, I can help still you with your refinance if your home is located in Washington. I just have to keep your new FHA loan with Wells Fargo. Other banks have followed suit with a few giving us deadlines of up to this Friday, June 22, 2012 for accepting FHA streamline loans they do not service.  

UPDATE: Received a notice of one bank adding a price hit for FHA streamlined refinances… somehow I don’t think HUD invisioned banks cherry picking and charging more for this program when HUD reduced the mortgage insurance premiums.

I continue to get announcements from the various banks and lenders we work with. Thankfully not all banks are following Wells Fargo’s suit.

BOTTOM LINE: if you have an FHA mortgage and are interested in an FHA streamlined refinance, please don’t delay! Banks are making them less available.

If your home is located anywhere in Washington state, I can help you with your FHA insured loan.  We are *currently* working with lenders who will accept FHA loans currently being serviced from other banks.  Click here to apply.

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