APR was created by our government to help consumers select a mortgage rate. It was intended to be a tool that would allow someone to simply compare various mortgage scenarios and shop mortgage lenders for the “best rate” at the lowest cost. Unfortunately, APR is probably not providing an accurate view of what the true cost of the mortgage, whether it’s for a home purchase or refinance, is. [Read more…]
APR is not the best tool for shopping mortgage rates
October 3, 2012 by 1 Comment
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.
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.
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…]
Tis the Season for Vacations
August 9, 2012 by Leave a Comment
Many families are squeezing in a vacation during the remaining days of summer. I can’t blame them, I’m just back from one myself! If you are in the mortgage process, it’s critical that your let your mortgage originator know of any vacation (or business travel) plans.
If you’re going to be in a spot where you can receive important documents and respond to emails, it may not be a huge issue. If you’re going off the grid, it may impact your rate lock commitment if your loan is currently locked. Your mortgage originator will need to price out a long enough lock period for your loan (if you’re locking) or you may opt to float and not lock in the current rates available. And of course, if you run out of time with your lock, the rate lock commitment may be extended.
Another factor is signing your final loan documents. Escrow companies can email (I do not recommend sending final docs via email) or send your loan documents via something like FedEx or UPS. This can be a bit risky as well as if a signature is missed or something is not notarized properly, your transaction may be delayed.
The more notice you can provide your mortgage originator about vacation or business travel, the more time they will have to prepare your options for the mortgage process.
How Long Will PMI Stay on my HARP 2.0 Mortgage?
July 25, 2012 by Leave a Comment
This is a question that I’m often asked by Washington home owners who are considering refinancing their current conventional mortgage using the HARP 2.0 program. The answers I’ve received from private mortgage insurance companies vary from “it’s up to the mortgage servicer” to “when the new loans principal reaches 78% loan to value”.
If your current loan to value is triple-digit because of being underwater, the thought of paying private mortgage insurance for years may not sound appealing. Here are some points I encourage my clients to consider:
- determine when your existing private mortgage insurance is set to terminate. If it’s before December 2013 (assuming the HARP program is not terminated early, which Fannie and Freddie have reserved the right to do) you could consider delaying your HARP refi so that you won’t have PMI on the new loan.
- compare your existing principal and interest payment (excluding the private mortgage insurance) to the proposed HARP payment including principal, interest plus mortgage insurance. Many of my clients are saving hundreds of dollars each month – even with keeping their mortgage insurance.
- consider how long you plan on keeping your home and what your alternatives may be. If you are underwater and are planning on staying in your home or eventually converting it to a rental property, reducing your payment now may be beneficial. If you are planning on doing a short sale, then refinancing at this time would probably not pencil out.
With HARP 2.0 refinances, when you have private mortgage insurance, most pmi companies are transferring the pmi certificates over to the new lender without any issues. The pmi rates stay the same so if you’re currently paying private mortgage insurance monthly, you can estimate that the new pmi payment will be roughly the same with your new mortgage payment.
If you have lender paid mortgage insurance, often times it was paid for upfront and there will be no private mortgage insurance for the home owner to pay. Sometimes the lender paid mortgage insurance (LPMI) was being paid monthly by the lender and in those cases, the pmi company may convert the policy to “paid monthly” so the borrower can assume it.
If you’re interested in a mortgage rate quote for a HARP 2.0 refinance for your home located anywhere in Washington state, contact me.
Freddie Mac HARP 2.0 Loans Getting Tougher
July 12, 2012 by 15 Comments
One of the lenders that we work with for Freddie Mac HARP 2.0 refi’s has announced today that they are not accepting applications for loans locked after July 20, 2012.
The bank states they’re doing this to get a handle on their pipeline. If you’re in the process of refinancing via HARP 2.0 and you have a loan to value that exceeds 105%, you may already know that the process seems to be taking a couple months.
If you qualify for a HARP 2.0 refinance: if you have lost equity in your home and your current mortgage is securtized by Freddie Mac prior to June 1, 2009 – please do not delay starting your HARP 2.0 refinance… your options may be dwindling.
If your home is located in Washington state, I’m happy to help you with your refinance.
Has your Bank turned down your refi?
July 5, 2012 by 1 Comment
In 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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