UFMIP Set to Increase for FHA Refinance and Purchase Mortgage Loans

A couple weeks ago, I touched on the Upfront Mortgage Insurance Premium (UFMIP) for FHA mortgage home loans. As a short recap, the UFMIP is a HUD “fee”, and is a percentage charge of total loan amount to a refinancing or home purchase borrower. The premium is paid upfront and is a part of closing costs. This “fee” goes to HUD and not the lender. HUD charges this premium in order to remain solvent and continue the FHA insured loan program.

Currently, the UFMIP for an FHA loan is equal to 1.75 percent of the borrower’s total loan amount. So, if your total loan amount, including closing costs is $200,000, the UFMIP will be $3,500.

Beginning in April of this year, the UFMIP percentage is moving up to 2.25% and will include FHA streamlines as well.

Long story short, if you are looking to do an FHA loan, getting your application in before the April deadline would be a good idea while mortgage rates are still low and the UFMIP is still at 1.75 percent. Under the new percentage, the UFMIP on a $200,000 loan amount is $4,500. That’s a $1,000 difference in closing costs between the 1.75 percent and 2.25 percent premium percentages. Nothing to sneeze at for sure.

Refinance mortgage rates have continued in steady fashion over the past week. There has been no major news to influence rates and the treasury yields have held in a nice tight range.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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Housing Numbers Fall Along with Refinance Mortgage Rates

We had a few good months in the housing market with both previously occupied and new home sales. The mood on the street was lifting, while signs of a housing market stabilization were shining bright. Then the December numbers were reported.

Sales of previously occupied homes took the largest monthly drop in more than 40 years in December, marking a figure more dramatic than most had expected. December home sales were down nearly 17 percent and many are attributing this deep slide to the home purchase tax credit extension. Sales had been expected to fall by 10 percent, but December's sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday.

2009 home sales closed out the year at 5.16 million, an increase of about 5 percent from the year earlier and the fist annual sales gain since 2005. This may sound good, but home prices fell by 12.4 percent, the largest decline since the Great Depression.

Regarding new home sales, it was reported today that sales fell 7.6 percent to a 342,000 unit annual rate from an upwardly revised 370,000 units in November. It was the second straight month that new home sales declined. For 2009, new home sales fell 22.9 percent to a record low 374,000 units.

There is great debate on the street as to whether home sales and prices will drop further form here. One camp cites the fact that inventories have fallen and that the tax rebate incentive has been continued through June. The other camp is stating that there is a huge inventory of foreclosures yet to hit the market while the jobs picture has not improved.

Most would agree that we have already experienced the worst of the housing downturn, but where we go from here will depend on a number of factors yet to be determined. Factors such as employment, loan modification programs, mortgage rates, and lenders opening their wallets a little wider.

So home value and lender programs are a key concern still, not only for those purchasing homes, but for those refinancing.

On the refinance mortgage rates front, we have experienced a drop once again. The lousy housing numbers are prompting investors to get a bit jittery and many are moving toward a flight to safety in US Treasury bonds. This is causing the treasury yield on the 10-Year bond to drop and mortgage rates have dropped along with it.

There is much concern that mortgage rates could rise significantly once the government’s mortgage-backed securities and Treasury buy-back programs come to an end, which is right around the corner.

We’ll have to wait and see if the government comes in to save the day once again in an effort to keep mortgage rates near the current all-time lows.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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FHA Refinance and the Upfront Mortgage Insurance Premium (UFMIP)

The FHA refinance home loan program offers many benefits to homeowners that are refinancing a majority of the equity in their home, and also for those with low credit scores. You get qualified mortgage refinance rates at that near a person refinancing with a loan-to-value ratio (LTV) under 80 percent with an excellent credit score.

One of the major reasons that the HUD is able to insure the FHA refinance loans is through the Upfront Mortgage Insurance Premium (UFMIP). There is much confusion among home loan borrowers about the UFMIP, so I thought I’d try to explain it here.

The FHA UFMIP is an upfront charge for a refinance loan that is charged to maintain the FHA program. Currently, the UFMIP is equal to 1.75% of the borrower’s total loan amount. So, if you are refinancing $200,000 with all closing costs included, the UFMIP will be amount to $3,500 (200,000 times .0175). So, the total loan amount would be $203,500 because the UFMIP is added upfront to the total loan amount.

Is the UFMIP a closing cost?

Yes. It will likely be posted to the good faith estimate as a settlement charge, so yes, it is a closing cost.

Does the lender get this money as a profit?

No. The UFMIP goes to the HUD department.

Does the UFMIP count toward the qualifying LTV?

No. This is very important for those with high LTV scenarios. The UFMIP is not added to the total loan amount for LTV purposes, which is currently allowed at 97% LTV for a rate/term refinance and 85% for a cash-out refinance.

Should I include the UFMIP in my Breakeven Analysis?

Yes. Since it is really a closing cost, it should be included in your refinance breakeven analysis. For example, suppose you are refinancing $200,000, of which $2,500 are for closing costs and the required UFMIP is $3,500. Your total bottom-line monthly savings will be $225 with the refinance. So, your total real closing costs are $6,000 ($2,500 closing costs plus $3500 UFMIP).

The breakeven point in this example is 27 months. ($6,000 total costs divided by the $225 per month savings).

Now the good thing about knowing this information is that you can easily compare between a conventional loan quote and an FHA refinance quote. Get a quote and good faith estimate for the same qualifying interest rate for both conventional and FHA, and do your breakeven analysis. The numbers will tell the story.

I hope this helps!

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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Refinance Mortgage Applications to Rise as ARMs Reset Higher

As if we need another kick in the stomach during this trouble economic period, thousands of US homeowners are experiencing fresh payment shock on their home mortgages as adjustable rate mortgages reset higher. Unfortunately, this is leaving countless homeowners in a struggle to make ends meet at the end of each month.

Expect a rise in the number of refinance mortgage applications as the full wave of the current ARM resets hit across the country.

All of this is in face of declining home values throughout America, leaving many homeowners in an “underwater” mortgage scenario. This is where the value of the borrower’s home has decreased to a level that is below the principle balance of the mortgage on the house.

The actual number of ARMs due to reset this year is unclear, but analysts estimate that as many as 1.3 million borrowers took out $389 billion in option ARMs in 2004 and 2005 alone. Many of these home loans will be due to adjust this year.

Another worry is that the Fed will increase interest rates in the coming months in order to fend off inflation. These are the rates often tied to ARM indexes and could result in more payments being adjusted upward sooner.

Add the soon ending home buyer tax credit and this could pack another wallop to an already ailing housing market.

For those that can’t refinance out of their adjustable rate mortgage, they would be advised to try and work something out with their lender. The Obama administration has been increasing pressure on banks to help borrowers, but it's still up to the banks to decide if they will. We have heard this story too many times in the past couple of years, so don’t expect much help with government “subsidized” mortgage loan modifications.

Home foreclosures have steadied somewhat recently, could reach 4 million in the US in 2010 according to RealtyTrac. Let’s hope the numbers are wrong.

On the mortgage refinance rates front, the 10-Year treasury yield has backed off a bit over the past week, causing a slight dip to already attractive home loan interest rates.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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Mortgage Refinance Rates Drop on Week

On Tuesday, Treasury bond prices rose, pushing yields to their lowest level since Christmas amid a slight up-tick in activity. This, as we know, is good for refinance mortgage rates and rates have dropped this week.

The key for future significant interest rate movement to the upside is to watch the yield on the 10-year Treasury. Any break above the 4.0 percent level could mean bad things as far as mortgage rates go.

As for the economy and the jobs front, ADP projected that non-farm payrolls will post an 84,000 decline in December, a touch worse-than-expected. Even so, the trend is positive and, despite month-to-month variations, ADP has tracked the official NFP change fairly well. Whether payrolls turned positive in December or not, they are headed for positive territory.

Pending home sales for November did not fare so well. The number of people preparing to buy a home fell sharply in November, an unsettling new sign that the housing market may be headed for a "double-dip" downturn over the winter. The National Association of Realtors said its seasonally adjusted index of sales contracts fell 16 percent from October to November, ending nine months of gains. Economists surveyed by Thomson Reuters had expected only a 2 percent drop. No doubt, the governments $8,000 tax credit expiration, then extension to this spring has played a major role in November’s pending sales housing numbers.

So, as the trend has gone, we are getting conflicting economic reports on some of the major areas affecting mortgages and mortgage rates.

In addition, the Federal Reserve has been busy buying up $1.25 trillion in mortgage-backed securities to help keep interest rates at or near record lows. This program almost single handedly brought the mortgage spread premium (and the rates offered to mortgage borrowers) down by a full percentage point. That program is scheduled to run out at the end of March, though a sudden jump in rates could force the Fed to extend it.

Refinance mortgage rates are still near historic lows, so there is still time to take advantage of the low rates. Just make sure to get a solid refinance pre-qualification to include your income, credit, and approximate home value before you jump in to the process. Those that are currently qualified stand to reap a financially significant benefit with low mortgage rates that may not be available again in the future.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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Treasury Yield Creeping Up Along with Refinance Mortgage Rates

In the span of a few short weeks, the yield on the 10-Year treasury has bolted up by more than one-half of a percentage point. That is a major move in treasuries and confirms the current investor mood is getting a bit comfier at the year’s end.

Whether investor sentiment moving away from long term bonds in favor of riskier and higher yielding investments is smart here is not our call, we can only work with what is given. Of course we know that as the 10-Year treasury yield goes up, so does refinance mortgage rates. So, with the recent investor movement out of 10-Year bonds and into the equities market, mortgage rates have bounced up off historic lows by almost one-half percent, roughly the same amount as the rise in the 10-Year Treasury Yield.

Fortunately for those still considering a home refinance, mortgage rates are still in good shape with the current par or “even” rate on the 30-year fixed home loan standing near 5.25 percent.

The big test for further and significant increases to mortgage refinance rates will be the 4.0 percent level on the 10-year treasury. Back in June of this year, we almost breached the 4.0 percent level, but there was strong resistance at that mark. The 10-year ultimately fell back to levels near 3.2 percent in November.

Just as with stocks, major resistance levels, once breached, can lead to a major move upward. The10-year treasury 4.0 percent mark is the major resistance level to pay attention to as far as refinance mortgage rates are concerned. A solid close above this level could be a bad sign for mortgage rates, at least in the short-term.

I know that there are many people that held out when rates recently hit historic lows, but refinance rates are still in great shape for those considering a lock. Yes, they have bounced off their lows, but the risk that interest rates will rise significantly higher still outweighs the risk that they will fall like a rock at current levels.

In housing, the S&P composite index of home prices in 20 metropolitan areas was flat in October, falling short of expectations for a rise of 0.2 percent according to a Reuters survey. September's index was revised upward to a gain of 0.4 percent, from a previously reported 0.3 percent.

Some would leave you to believe that the housing market has now stabilized, but that assessment may be preliminary. A continued rise in home defaults along with a huge crop of foreclosures waiting to hit the listing market could produce another wave of falling home prices. Continued low mortgage rates along with improvement in consumer confidence and employment could help to curtail further home price drops. We’ll just have to wait and see where the ball bounces from here.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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Current Steep Bond Market Yield Curve can affect Mortgage Refinance Rates

Those that follow the Refinance Toolbox blog know that US bond yields play a major role in the mortgage refinance rates offered to the public by lenders. More specifically, it’s the yield on the US 10-Year Treasury, which is the benchmark for home mortgage interest rates. As the yield goes up, rates go up and vice-versa.

Mortgage rates have recently been holding at the lowest levels in history, thanks in large part to a consistent low treasury yield.

Over the past several days, the “Yield Curve” has been getting steeper. The yield curve is the difference between rates on short-term and long-term Treasuries, and is currently at its highest level ever. This tells us that investors are expecting a strong economic turnaround ahead, and are selling out of longer-term US treasuries, such as the 10-year treasury, in favor of higher return investment vehicles.

As the 10-year treasuries get sold, the bond price drops, and the yield goes up. Not a great thing for refinance mortgage rates.

Banks once again are the big winners here. They borrow from the Fed at short-term rates near zero, while higher long-term rates mean even bigger risk-free profits for the industry.

Consumers on the other hand, get slapped again. Most mortgages and many other types of loans are pegged to long-term rates, a steeper yield curve means a higher cost of borrowing for most consumers and businesses.

Refinance mortgage rates have lifted a bit off their lows, but are still in great shape. But, we’ll have to keep an eye on the 10-year treasury yield. It closed yesterday at 3.744%, still in good shape, but a whopping one-half percent higher than it was only 2 weeks ago.

Continued stronger-than expected economic reports and hints of future inflation could send the yield over 4.0% very quickly. Since the current mortgage spread premium is now in historic check, you could expect mortgage rates to rise with the treasuries step for step.

In continued good news for the housing market, home re-sales surged last month to the highest level in nearly three years. Much of the sales increase is due to buyers racing to complete their sales before the original expiration date of a tax credit for first-time buyers, originally scheduled to expire Nov. 30.

The housing market recovery, however, is still facing strong headwinds, as high unemployment figures continue with no clear end in sight. Mortgage defaults are still setting records and some experts warn that hundreds of thousands of foreclosed properties have yet to be put up for sale. Plenty of traditional sellers are also keeping their homes off the market, hoping for a better price.

So what does this mean for those looking to refinance their home? Well, mortgage refinance rates are still in great shape, but as you can see by the current steep yield curve, could be heading northward. It might not be such a bad idea to check on locking your interest rate now, as the risk of rates going up significantly far outweighs a drop in refinance rates at current levels.

Just make sure to receive a thorough pre-qualification from your refinancing lender before you pull the trigger. You want to have reasonable idea of your home’s value along with an analysis of your credit standing and income ratios for mortgage qualification purposes. If you qualify based on a solid pre-qualification, there is no reason not to lock at current refinance rates if it creates the financial benefit you are looking to achieve.

If you are considering a home mortgage refinance now and need some help, have questions, or need some competitive refinance rate quotes, please check out the popular Refinance Tool Box. Just give a call at 888-850-9888 or fill out a Rate Quote Request online for professional assistance without the aggressive high-pressure sales tactics.

May the Mortgage Refinance Rates be with You!

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