Fannie Mae’s March Forecast Stomps out 5% Mortgage Rates

Fannie Mae released their monthly forecast for mortgage rates. The previous month, they received a lot of attention because of how rosy it was with rates forecasted to hit 5.9% by the end of this year with nearing the mid-5% range in 2025. The March forecast, which was released yesterday, is not as optimistic. [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.

[Read more…]

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

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.

The Cash-In Refi

You’ve probably heard of a “cash-out” refinance where a home owner is taking equity out of their home for home improvements, debt consolidation or if they’re paying off a second mortgage that was not obtained when they purchased their home.   A “cash-in” refinance is a fairly new term and something I’m seeing first-hand due to the current insanely low mortgage rates.

Freddie Mac reports that “in the second quarter of 2010, 22 percent of homeowners who refinanced tehir first-lien home mortgage lowerd their principal balance…this ties the record for the third highest “cash-in” share since Freddie Mac began keeping records on refinancing patterns in 1985.  The revised cash-in share in the first quarter was 18 percent.”

“Cash-in” means that the home owner is bringing funds to escrow for closing.  Their loan amount is not high enough to cover closing costs and prepaids.   Sometimes home owners, with a healthy savings, will opt to pay for closing costs separately instead of financing it into the new loan but a majority of home owners opt to have the cost added to their payoff amount, thus increasing their original principal balance.   Some are deciding to plunk down enough cash to reach a certain loan amount or loan to value to obtain an improved interest rate.  For example, a Seattle area homeowner with a current loan balance of $575,000 might decide to use $10,000 towards her loan amount to obtain a high balance conforming mortgage rate instead of a higher non-conforming/jumbo rate.  (Current loan limits in King, Snohomish and Pierce County for a single family dwelling for high balance is $567,500).  UPDATE 1/1/2012: Loan limits currently $506,000 for conventional and $567,500 for FHA (and may change following years).

Some home owners are doing this because of loan to value issues–not because they have an extra grand or two burning a hole in their pocket.  I’ve had a few clients who have paid off and closed their home equity lines of credit to qualify.  Or perhaps they have an appraisal come in slightly lower than expected, exceeding the allowed loan-to-value guidelines.  For example, if a home owner in Bellevue was anticipating a minimum appraised value of $380,000 for his home to finance his Home Affordable Refinance loan amount of $399,000 with a 105% loan to value yet his appraisal comes in at $376,000; he could have his loan amount adjusted to 105% loan to value at $393,750, bringing in $5,250 to closing. 

Funds for closing will need to be documented, just as they would a mortgagae being used a home purchase, with statements from the accounts the funds came from.

Frank Nothaft, Freddie Mac Vice President and Chief Economist states:

“Interest rates on fixed-rate mortgages are at 50-year lows, making refinancing attractive if borrowers qualify, and similarly rates on savings instruments like CDs are also very low, which makes the choice of paying down mortgage principal very attractive to borrowers with extra cash reserves.”

I’m happy to review your current mortgage scenario at no obligation to help determine if refinancing makes sense for you.  The only catch is, your property needs to be located in located in Washington state since that’s where I’m licensed.