Refinance Mortgage Rates and Discount Points

When quoting a mortgage rate for a refinancing homeowner, one of the first questions I usually receive is, “How many points are with that rate?” Now this would seem like a logical question because pretty much all rate quote advertising is geared toward the interest rate and how many discount points are applied. Yet, discount points versus the corresponding mortgage rate is only part of the picture.

Since mortgage discount points are paid upfront (or rolled-back in to your loan amount), they are essentially a closing cost. One discount point equals one percent of the total loan amount. So, if you are refinancing a $200,000 loan amount at a mortgage rate with one discount point applied, the discount point fee is $2,000 and applied to your closing costs.

Now here’s the dirty little secret for those that want to compare the rates among different lenders. Forget about how many discount points are being applied to your quoted rate! Yes, you read that correctly.

What you want to see are the bottom-line closing costs on a good faith estimate for the same rate, loan program, and qualifying factors from the different lenders you contact, on the same day.

As an example, suppose you are refinancing your first mortgage that has a remaining balance of $150,000, your estimated property value is $250,000, and your credit score is 745. You are looking for a 15-Year Fixed Rate mortgage. Make sure that each quote you receive is for the same variables and on the same day in order to get the most reliable comparison.

You speak with lender A, and they send you a separate good faith estimate on a 15-Year fixed rate mortgage for a 4.25%, 4.50%, and 4.75% program option. When you speak with lenders B and C, make sure to get good faith estimates for the 15-year fixed rate 4.25%, 4.50%, and 4.75% options using the same qualifying factors.

Next, you compare each rate quote by adding up all the costs and subtracting out any items for estimated pre-paids, estimated escrow deposits, estimated mortgage tax, and estimated recording fees. This leaves you with the direct bottom-line closing costs to compare among differing mortgage lenders for each rate you were quoted.

You may find that lender A quoted you the lowest discount points for any given rate, but their bottom-line closing costs are actually higher than lenders B or C. The bottom-line with tell you either way.

The weight that a discount point carries toward lowering a mortgage rate can vary among lenders, not to mention the fact that the fixed, or “third party” portion of closing costs can be significantly different among mortgage lenders.

Remember, don’t worry about the discount points, you want to know the bottom line!

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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15-Year Fixed Rate Refinance Still a Great Deal for Those in 30-Year Mortgages

I’ve touched on this topic before, but again want to reiterate that refinancing into a 15-Year mortgage can be a great deal for those currently in 30-Year mortgages. 15-year refinance mortgage rates are still in awesome shape, but may not be this low for too much longer. The key is that the spread between current 15-year and 30-year mortgage rates has widened over the past several months, making the 15-year interest rates extremely attractive for those with a loan timeframe of 5 years or more.

Refinancing into a 15-year fixed rate mortgage will benefit those that can comfortably handle the payment of course, but it may not be as high as you think. Lets go over an example so you can see what I’m rambling about.

Say Mr. Borrower is refinancing out of a 30-year fixed mortgage into a 15-year fixed rate home loan. He took out his original mortgage 4 years ago for $190,000 at 6.5%. His mortgage is paid down to $180,000 and he is refinancing a $180,000 loan amount into a 15-year fixed rate loan at 4.25% with no lender fee.

Mr. Borrower’s current principle and interest (P&I) monthly payment is $1,201 and after refinancing into the 15-year fixed, his monthly P&I will be $1,354. So, the monthly payment only increases $153.

The benefits for paying an additional $153 per month are quite astounding.

First, his loan term will be reduced by 11 years. (26 years remaining on current loan minus the 15-year new loan term).

Secondly, he will be saving a net total of $130,338 in interest over the term of his new mortgage. (26 years remaining on current mortgage results in $194,076 remaining interest to be paid. Total interest to be paid for 15-year loan is $63,738. $194,076 minus $63,738 equals total savings of $130,338).

Thirdly, Mr. Borrower will not be taxed on that $130,338 in savings (profit).

For those with a long-term timeframe and financially in the position to take advantage of the current 15-year refinance mortgage rates, this is really a fantastic opportunity while the interest rates last.

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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What are Your Home Refinance Goals?

Before a refinancing homeowner even speaks with a refinance mortgage lender, they should write down the goals hoped to accomplish for their new loan. Now this may sound funny, but once you begin your refinance search, you will most likely encounter mortgage quotes for multiple refinancing options. It is very easy to get lost in the interest rates, discount points, closing costs, and loan terms. Without an initial goal, it can be easy to refinance into a new mortgage that may not be the best fit for your specific circumstances.

For instance, is money tight, and you want to save at least $300 per month with a 30 year fixed rate mortgage. Maybe you want to consolidate all your credit card balances to save $500 per month and shorten the term of your home loan. Or, maybe you want to consolidate that first and second mortgage into one lower fixed rate and save at least $250 per month.

Maybe your refinance goal is unrealistic or maybe you are understating the actual financial benefit for a new mortgage, but it is still important to have an initial goal.

With your refinance goal in mind, next you need to determine what your anticipated timeframe will be for your new home loan. Will you be in your new mortgage for at least five years, ten years, or until the end of the loan?

With these two factors alone (goal and timeframe) you will be well armed to hit your refinance lender for some quotes.

Your refinancing loan professional should be able to quickly check current mortgage programs for your initial goal based upon your pre-qualifying factors. Some refinance lenders will also be able to give you a “breakeven” point in months for your closing costs.

So, if your goal is to save $300 per month refinancing your first mortgage into a 30-Year fixed loan and you plan to stay in your new mortgage for at least 5 years, a bottom-line quote that will save you $325 per month with a breakeven point of 22 months may be just the program you are looking for.

The point is that you will be well informed at the beginning of your refinancing process and be able to skip to the bottom-line to determine your desired benefit for your timeframe.

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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Many Self-Employed Missing Out on Low Refinance Mortgage Rates

The subprime mortgage meltdown along with its banking crisis aftershock has hurt the chances of many self-employed individuals looking to take advantage of today’s historic low refinance mortgage rates. After banking balance sheets and liquidity took a severe downturn, mortgage lenders began to tighten up their underwriting guidelines for offer refinance programs.

No-Doc and Reduced-Doc loans were among the first casualties of the tightened lending standards. The option for a homeowner to refinance with anything but a fully-documented income loan is pretty much non-existent in today’s refinance lending environment.

Why you might ask? Well, mortgage lenders do not want to take on any risk after the meltdown. A Full-Doc loan gives them the most assurance of the ability of the refinancing homeowner to repay their loan.

Self-employed individuals have been impacted greatly by mortgage lender restrictions on loan program options. During the great housing boom earlier this decade, most self-employed people simply used a “Stated Income” loan to either refinance or purchase a home. This option was used because mortgage lenders use the bottom-line income for self-employed individuals, after tax write-offs for fully documented loans. Since most self-employed people will not qualify Full Doc after income tax write-offs, the stated income loan option was a very nice deal.

Now that stated income refinance loans have fallen by the wayside, there is little option for the self-employed if their bottom-line numbers do not meet refinance program debt-to-income (DTI) ratio guidelines.

One option for a self-employed person that misses the DTI ratio is to add a working spouse, domestic partner, or other adult individual the permanently resides in the home to the refinance mortgage application. The added income could be enough to meet the DTI guidelines and allow the homeowner to refinance.

Unfortunately, adding another person to the mortgage may not be an option, or may not be something that a homeowner wishes to do. Yes, many self-employed people have been painted into the corner with the current refinancing loan restrictions.

You might also ask why mortgage lenders are not doing more to help out homeowners, self-employed or otherwise, after taxpayer dollars came in to save their behinds? At the moment, the mortgage lenders are fending for themselves and are not required to make loans if they do not wish. It’s unfortunate that the TARP bailout money given to them did not have any strings attached in this vain.

In fact, bank balance sheets are getting stronger and stronger with many of the fat cats actually paying back TARP funds to the government. Still, no relenting on mortgage underwriting guidelines and little help for those trying to get a loan modification.

President Obama has recently put some political pressure on the banks to begin lending once again, but it’s a tough industry to lobby. We’ll have to wait and see if any future legislation or other governmental action with teeth can help to open up the lending guidelines in the near future, but it is going to be tough.

It may not be until the economy and housing markets recover more robustly, that less restrictive refinancing mortgage programs are offered for the self-employed and other homeowners that would benefit significantly with a home refinance.

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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How About a Little Service with those Low Mortgage Refinance Rates?

Sometimes, we in the home loan mortgage refinance business tend to spout out at the mouth about the current state of interest rates, program options, loan scenarios, and on and on, yet customer service is rarely mentioned. Yes, this is extremely important, yet an often overlooked aspect of the borrower’s refinance lender decision.

Quality home loan lender service is crucial to both the mortgage pre-qualification stage, as well as the actual loan process stage.

Sometimes, a loan officer will act more as an order taker than an actual advisor. Either through inexperience or the “Asking Less Leads to More Sales” approach, the borrowing customer is really short-changed and may not even know it.

Ideally, you want to work with a loan advisor that will take an interest in your financial goals and ask questions about your loan scenario. Many times, there is a much better program for your particular objective and timeframes that can go undiscovered because of an order-taker mentality. I don’t know about you, but throwing up to tens of thousands of dollars out the window would get me a little hot and bothered, when a few extra questions would have made the difference.

Good service also means answering all customer questions in a courteous and timely manner, discussing possible loan scenarios is your appraisal comes in at X, instead of Y, preparing breakeven analysis and total benefit reports, and relaying your home loan options in a clear to understand manner.

I can’t tell you the number of people that call the Refinance Toolbox, complaining that an advisor with Lender X will not answer their phone or email. Let alone the number of times a homeowner has been pre-qualified with bad or even “unrealistic” loan programs.

In the loan processing stage, you want your lender to run like a well-oiled machine. This does not mean that unforeseen loan issues won’t arise, appraisals will come in perfectly, etc., in every case. It means that your lender will have a clear and concise loan process initiated by experienced and trained staff for your particular loan product. It also means that you have total access to your loan process, loan advisor and processor …. You should be informed during your home loan process.

So how do you tell if you’re speaking with an order-taker or the real deal? If your loan advisor did not already explain their mortgage experience, give you a thorough pre-qualification, and explain their company loan process, just Ask!

Your home loan refinance is a huge decision, so you want to make sure that you have as much information as possible about your potential new mortgage lender. You Deserve It!

If you are considering a refinance now and need some help, have questions, or need some competitive 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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Refinancing Into a Lower Term Mortgage Can be a Great Investment

Everyone wants a great high yielding and low risk investment opportunity, but seldom does one think of a home mortgage in that light. Yet, for many homeowners, refinancing into a lower term mortgage can be a great long-term investment strategy, especially when refinance rates are as low as they are currently.

For instance, suppose you currently have a 6.5% 30 year fixed rate mortgage that you took out 2 years ago. The total interest on that loan over the entire term of the loan amounts to $318,861, of which you have already paid $32,000.

Now, if you refinanced into a $250,000 15 year fixed rate mortgage at 4.5%, the total interest on your new home loan would only amount to $94,247 over the 15 year term.

So lets recap. The 30 year interest of $318,861 less the $32,000 already paid less the $94,247 total interest for the 15 year fixed mortgage results in a net interest savings of $192,614 by refinancing to the 15 year option.

Now you might say that is better than grits and gravy, but the payment goes up. In this example the monthly payment would increase by $332.

Most people scoff at the idea of increasing their mortgage payment, but I would suggest that you consider it an investment and a Great Deal!

Think about it. We may never see the current historic low interest rates ever again after we dig out of this national economic mess.

In this example, which is pretty typical, the homeowner would be investing in a sure $192,614 profit by paying an additional $322 per month into their own home! Better yet, the IRS is not going to take 50% nor 28% nor 15% of that profit …. Wer’e talking a tax-free investment!

I don’t know about you, but I seldom run into such safe and prosperous tax-free investment opportunities.

Not to mention that your mortgage paying days will be over in 15 years as opposed to 28 years. For those in their 20’s, that may not seem like an issue, but the prospect becomes much more important to those over 30 years old.

All that said, there is a risk to this investment strategy. If you cannot make the increased monthly payment, then you can run into a major problem and possibly risk losing your home.

It is ultra-important that you can make the increased payment comfortably. Even if the qualifying debt ratios say that you are good, you need to make a real-world assessment considering your current employment and monthly budget.

If the budget checks out, then you could be on your way to making one of the best investment decisions of your life by refinancing into a shorter term home loan while mortgage refinance rates are so low.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Cost of Waiting for Lower Mortgage Refinance Rates

If you have been following mortgage refinance rates over the past month, you will have noticed that rates have dropped to near the historic low levels experienced earlier this year. Many refinancing homeowners that sat on the fence earlier this year have been quick to jump in on this latest mortgage rate drop and lock their loan.

Yet, there are others that are waiting to refinance in the event that interest rates drop even further. This is fine strategy if current refinance rates are not creating a benefit that will help you much. But for those sitting on a significant financial benefit at current rates, this could end up costing you up to tens of thousands of dollars in the long run, even if you do eventually refinance at a lower-than current interest rate down the road.

For example, suppose that you currently have a 1st and a 2nd mortgage totaling $250,000 that you want to refinance into one low fixed rate 30-Year home loan. Your current combined principle and interest (P&I) monthly payment is $1,622. You can refinance today at 5.0%, which would result in a new P&I payment of $1,342. Your total monthly savings would be $280.

You hold off on your refinance plans because a so-called “expert” on CNBC says that rates could go down further in 2010 (no one knows where rates will go next week, let alone in 6 months to a year!).

Now, assuming that things go your way and mortgage refinance rates do drop to 4.75% 6 months down the road your new P&I payment would be $1,304 per month. You will then be in a deal that is $38 per month better than if you had locked 6 months earlier. That’s great, but don’t forget that you had a $280 benefit 6 months ago, so you lost out on $1,680 in savings. It will take you 44 months to make up the difference ($1,680 divided by $38).

Is that really worth the risk? Suppose interest rates actually go up from here or take a year to drop to 4.75%? (In which case, it would now take 88 months to make up the initial savings difference).

What if things don’t go your way and refinance rates go up and don’t retreat back to even 5.0%? If you hold off on locking for a better deal and never end up refinancing, it will have cost you $100,800 in lost savings over the term of the current-rate proposed loan in this example.

Hey, everyone wants to get in at the absolute bottom, whether it be the stock market or mortgage refinance rates, but the truth of the matter is that few ever do. And the ones that do get in at the bottom can mostly be attributed to blind luck.

The moral of the story is that if you are staring at a significant financial gain with current historic low mortgage refinance rates, be very careful about holding your rate lock decision for hopes of lower interest rates. It could cost you dearly in the long-run.

If you are considering a refinance now and need some help, have questions, or need some competitive 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.

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May the Mortgage Refinance Rates be with You!

Current Low Refinance Mortgage Rates and Home Loan Term Reduction

Way back in the early part of 2009, the refinance mortgage rate spread difference between a 30-year fixed rate mortgage and a 15-year fixed rate home loan was virtually negligent. Many refinancing homeowners opted for the 30-year mortgage and the lower payment, since the cost of the interest rate was pretty much the same. The feeling was that the borrower could pay extra toward the principle to reduce their loan term or simply take advantage of the monthly savings for something else. The key was that the option was in the hand of the homeowner to make that decision.

Fast-forward to present and the interest rate spreads are vastly different. 15-year fixed rate mortgages are much cheaper than their 30-year counterpart.

For instance, I just ran a rate search for a loan scenario with a $250,000 home value, $200,000 loan amount and a 760 credit score. The closest to par or “even’ rate for the 30-year fixed is at 4.875%, while the closest to par for the 15-year fixed is 4.25%.

Yes, there is currently a significant reduction in rate for shorter-term loans.

If a refinancing homeowner took the 30-year mortgage option for their new $200,000 home loan, their monthly principle and interest payment would be $1,058 and total interest paid for the term of the loan would amount to $181,029.

Taking the 15-year option would result in a monthly principle and interest payment of $1,504 and total interest paid over the term of the loan would be $70,820.

The interest saved by choosing the 15-year refinance is $110,209!

Now, you might say that is all well and good but the monthly payment difference is $446. That is why it is extremely important to take the new payment into consideration before refinancing into a shorter term. You must be comfortable with the new payment.

Also consider that the increase in monthly payment may not be as significant from your current payment, because mortgage refinance rates are currently so low.

For example, if the borrower in the preceding example is refinancing from a $200,000 30-year mortgage taken out 2 years ago at 6.5%, their current monthly payment for principle and interest is $1,264. Refinancing into the 15-year option would result in only a $240 per month difference, plus a reduction in loan term of 13 years along with total interest savings of around $200,000.

Also, for those consolidating debts, a term reduction can lead to a lower overall monthly payment in many cases.

The long and the short of it is that there are many options to save significant dollars when mortgage refinance rates are as low as they are now. Planning your benefit in conjunction with your new mortgage timeframe is a smart way to go.

If you are considering a refinance now and need some help, have questions, or need some competitive 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 Home Loan Demand Soaring Again

The cure for sagging refinance mortgage application numbers is a good ole drop in interest rates, and that is exactly what has happened over the past several weeks. The combination of a consistent low 10-year Treasury yield and a falling mortgage spread premium has national average refinance rates for 30-year fixed rate home loans dipping below 5.0 percent for the first time since March of 2009.

To put a little perspective on the current mortgage rate picture, last year at this time, interest rates were over 6.0 percent.

The MBA's seasonally adjusted index of refinancing applications increased 17.4 percent to 2,881.5, its highest since the week ended May 29. Much of this may be due to the refinancing homeowners that stood on the fence earlier in the year, missing their rate lock opportunity before rates went up to 5.5 percent later in the summer. Now that par rates are under 5.0 percent for many home loan refinancing programs, the fence sitters have decided to jump on the opportunity and get over the fear that rates could drop even further.

In reality, the risk for rates to go up from here is much greater risk than waiting to see if rates come down. You might be risking the possibility for a 4.75 percent average market interest rate if rates drop for a 6.0 percent or higher rate if the mortgage market turns.

In other good short-term news, low mortgage rates combined with the government’s $8,000 tax credit stimulus bill for first time homebuyers has helped to stabilize the housing market. We actually had a slight price gain in housing for the last reporting month. We’ll take it!

As always, if you are considering a refinance, make sure to get a solid pre-qualification before you apply for your new home loan. Yes, it may take a little extra time on the phone with your home loan consultant, but it will be more than worth the effort.

If you are considering a refinance now and need some help, have questions, or need some competitive 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 Still Hovering Near All-Time Lows

The year 2009 has been great for mortgage refinance rates. We started off the year with a bang, as interest rates for 30 year fixed mortgages dipped below 5.0% for a brief period, before gradually climbing back up to the 5.5% level into the summer.

Fortunately, for those that missed their lock opportunity earlier in the year, rates have once again dipped to near historic low levels.

Mortgage refinance rates have been helped by the consistent 10-year treasury yield that has held near the 3.5% level for quite some time. The mortgage spreads have also come down with this recent mortgage rate dip.

Added to these mortgage rate-reducing factors, the US government recently plunked down billions to buy mortgage-backed securities that have been glutting the market. This may be helping to free up some lender and investor capital back into the mortgage markets.

If you are considering a refinance now and need some help, have questions, or need some competitive 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 Mortgage as an Alternative to Jumbo Conventional Loans?

There are many people that purchased homes in the “high-cost” areas of the country during the great real estate boom of the mid 2000’s. A rather larger percentage of these home loans were either adjustable rate mortgages or high loan-to-value (LTV) loans that carried a higher rate of interest.

With mortgage refinance rates being as low as they are now in the home loan market, it makes a lot of sense for these folks to refinance out of that adjustable rate or into a much lower fixed rate at present time. The problem for many of these homeowners is that the rapid decline in home prices over the past couple of years has tapped most of the remaining equity in their homes, and conventional refinance mortgage rates are relatively high for LTV’s over 90%, plus the ever skyrocketing cost of monthly private mortgage insurance (PMI) for conventional loans.

Another hurdle to folks in the expensive neck of the woods is to find competitive refinance rates for home loans over $417,000, which for the most part, are currently priced at a higher rate of interest for Jumbo conventional mortgage status.

One way to potentially sidestep this issue is to inquire about an FHA refinance home loan. In many high-cost areas, FHA loan limits far exceed the $417,000 cap imposed on conventional loans, and still give you rock-bottom current market interest rates.

Another benefit of the FHA mortgage is that you can refinance up to 97 percent of the appraised value of your home and not have to worry about your interest rate going through the roof. In a declining housing market, where your LTV is tight, this can give you a little extra breathing room as compared to a conventional home loan option.

It is important to note the FHA refinance will require a 1.75% upfront mortgage premium (UMP) that is added to the loan amount, but not included in the LTV calculation. Make sure to get your rate quote with the (UMP) added into the loan amount so that you have the “bottom-line” numbers for your home loan comparisons.

On the refinance mortgage rates front, rates continue to hold steady at near historic low levels. The mortgage-spread premium has declined a bit, and the 10-year treasury yield continues to be kind.

The housing value front is still a bit muddied as both pending and sold sales figures have improved in recent months, but the word on the street is that another wave of home foreclosures is about to hit the market.

All in all, just another crazy week in the world of home mortgage refinance.

If you are considering a refinance now and need some help, have questions, or need some competitive 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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A Deeper Look into Refinance Closing Costs

Now, I know that most everyone hates the closing costs associated with refinance home loans. In fact, most people feel that any cost or fee for a new mortgage is completely unacceptable. But, before you hang up the phone on your friendly loan officer upon the first mention of mortgage closing costs, please review the whole financial picture for your mortgage scenario, or you may be throwing tens of thousands of dollars in benefit out the window for spite.

First things First. There are actual and legitimate costs associated with a refinance mortgage home loan. Fees must be paid for title searches, attorneys, title insurance, closing agents, etc. Also, depending upon your state of residence, there may be a state mortgage tax. Most home refinance lenders will also charge a fee for your application and loan processing along with an underwriting fee, which are real overhead expenses incurred by your mortgage lender of choice.

First things Second. Most lenders will also charge an “origination’ fee, which is a percentage of your total loan amount and the real place where a lender makes their money, since the previously mentioned costs go to either third party vendors or for operating overhead, the origination fee is where the real profit lies.

First things Third. A borrower may choose to “Buy-Down” their interest rate using discount points, which are added upfront to closing costs. One discount point equals one percent of your total loan amount. A lender does not typically make any money when a borrower uses discount points, except in the case of a mortgage broker that sells a borrower a higher rate of interest than the “Par” or “Even” interest rate, whereby the broker receives a rebate back from the bank holding the mortgage.

As you might guess, refinance closing costs can add up rather quickly, especially for those utilizing discount points and for those that have rather large total loan amounts. A potential borrower may look at the bottom-line closing cost amount and quickly jump to the conclusion that their lender is trying to rip them off, but that is most likely not the truth. What you may view as a large closing cost sum could be one of the best long-term investments you will ever make.

As previously mentioned, a home mortgage lender really makes their money or profit from the origination fee that they charge, since all other costs are going to cover third party vendors and the overhead cost of running their business, including the processing of loans.

If the refinance lender charges, say a 1% origination fee on a $300,000 loan amount, that leaves $3,000 for the coffers. Now, you might feel that is even too much, but consider the following.

Of that $3,000, your refinance lender has to pay the loan officer that handled the loan, which generally may be a 50/50 split. The remaining $1,500 will then be hacked down again for a loan loss reserve, which could be as high as $500, leaving $1,000 for lender profit.

Now consider that the $1,000 profit is for a loan, which of course, closed. As we all should be aware, a percentage of mortgage applications never make it to closing, yet the lender has invested time, resources and money into these loans at a loss, which eats into the profit of successfully closed loans.

You now may be getting an idea to one of the reasons why so many mortgage lenders have closed their doors in the past several years.

From a mortgage borrower’s perspective, it is easy to understand why the “alert” radar kicks in after reviewing their good faith closing costs totals, but that may be an uninformed assessment at first glance.

Yes, there are mortgage refinance lenders that charge more than others, and may inflate processing, application, and title fees.

Also consider there are huge loan processing and customer service differences among home loan lenders. Comparing lenders on fees alone, without taking their “service” level into account could be a costly error.

The preceding closing cost information is meant as a general overview of closing costs and how lenders make their money, but is not how every lender operates. In any event, the information should give you a better general understanding of refinance closing costs and in an odd sort of way, actually make you feel better about them when you understand that your lender is not socking away all those closing costs into their pockets.

Now to the moral of the closing costs story:

Say you are offered a competitive refinance rate on a new 30 Year Fixed Rate home loan that will save you $200 per month. The total closing costs amount to $3,000, which are rolled into your new loan. The closing costs will have paid for themselves in 15 months ($3,000 divided by $200). If you stay in you new mortgage for more than 15 months, it looks like a good deal. If you stay in your new mortgage for the loan term, you will have saved $69,000 in total (360 months minus 15 months breakeven times $200/month savings), which is a great deal.

If you scoffed at the deal originally because of the $3,000 closing costs, that could come back to haunt you in the future. Also keep in mind that most refinance closing costs are rolled back into your loan amount so you are not paying that money out of pocket at closing. In a sense, you are using the mortgage lender to finance your long-term benefit, just like big business operates. If your timeframe for your new mortgage is longer than the breakeven point, then closing costs can be viewed as a great deal, and smart business.

Having the proper perspective on refinance closing costs is particularly crucial with today’s refinance rate environment, as interest rates are pretty much at historic lows. If you reject a new home loan deal because you deem that closing costs are too high, your “benefit” time horizon may pass you by as interest rates rise. Always look at your bottom-line benefit and your expected loan timeframe before closing the door on a potential home refinance opportunity.

Working with a lender that quotes upfront and guaranteed closing costs will be a big help for a refinancing homeowner. Your prospective new lender should be able to detail all closing and settlement costs, plus go over your breakeven analysis with you. In the end, the numbers will tell the story and you can act in your own best interest based on your bottom-line benefit in conjunction with your loan timeframe. The numbers just may result in a very pleasant surprise for you, even with closing costs.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Refinance Mortgage Rates Still Holding Low as Home Prices Stabilize

Alas, some good news pertaining to the overall general economy and the world of home mortgage financing. Home prices posted their first quarterly increase in three years, signaling the housing market just possibly is turning the corner, while mortgage rates continue to hug the lower end of the spectrum.

The Standard & Poor's/Case-Shiller's U.S. National Home Price Index released Tuesday rose nearly 3 percent from the first quarter to 133. The monthly index of 20 major cities increased 1.4 percent from May to June to 142, the second straight month the index registered a gain, but still way too early to hold a celebration party.

Home prices still have a long way to go to recover completely. In reality, home prices have fallen 30 percent from the peak in the second quarter of 2006. That said, even a clear stabilization in home prices would be a victory in the near term. If continued positive housing numbers extend into the 3rd quarter, that will go a long way toward the easing of refinance and home purchase mortgage lender restrictions, along with a possible further decline to the mortgage spread premium.

Of course, there would be nothing better for the overall economy than to have a stabilized housing market. The financial healing will begin and the jobs picture will become a whole lot rosier.

Just like predicting where refinance mortgage rates will go from here, predictions of the housing market recovery are not worth much. Just like with weather predictions, most forecasters are fairly accurate in the short-term, but the long term forecasts usually fall apart.

Earlier this week, Fed chairman Ben Bernanke declared the global economy is beginning to emerge from its worst crisis in generations, the emphasis will be on whether central banks continue to work together to prevent a crisis like this from happening again or if each will take its own path to assure the path to recovery is smooth.

There has also been a revisiting of the packaged mortgage CDO investments by a number of banking institutions. Although no standard pricing model has been adopted, some banks appear to be packaging those underwater mortgage debts alongside its AAA rated mortgages and marketing them as they are, with no pretense. If this type of investment vehicle takes hold, the entire financial system could be purged of it’s toxic debts and really open the mortgage lending industry up full throttle. The idea sounds nice on paper, but don’t hold your breathe if this latest toxic debt effort falls on its face.

Mortgage rates are still holding at low levels. The treasury yield has been bouncing back and forth, but really seems to have been hugging that 3.5% mark since early July. That is good for mortgage rates and good for those still looking to refinance their home loan or debt consolidation.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Refinance Mortgage Applications Rise as Home Loan Rates Fall

Home refinance applications rose last week as mortgage rates fell to a five-week low. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended August 14 increased 5.6 percent.

There appears to be two factors at force here driving down mortgage rates.

First is the decrease in the mortgage spread premium. Remember that it is the combination of the mortgage premium plus the yield on the 10-Year Treasury bond that makes up the interest rates for home loans that are offered to consumers. Earlier this year, the mortgage spread premium was at a whopping 3 percent when the treasury yield plummeted to near 2 percent. When considering the current bond yield to the national average mortgage rate for a 30-year fixed home loan, the resulting mortgage spread premium is now sitting at near 2 percent. That is a nice drop within one-years time.

The second reason for the recent drop in home loan mortgage rates is the decline in the 10-year treasury yield. Within the past five weeks, we have shaved nearly one-quarter percent off the yield, which is good for mortgage shoppers. The most likely culprit for the drop in yield is the reversal trend to the huge stock market bounce coupled with nice long-term projections of stable inflationary numbers. When inflation is in check and investors need a place to park their money, US bonds are often used, driving the yield down.

Although housing numbers have been much better as of late, many are still skeptical of calling a housing market bottom. Home inventories have decreased, but may be the result of the summer buying market coupled with the $8,000 tax credit incentive offered to first-time homebuyers by the US government. There are also slew of homes waiting to hit the market from “held-up” home foreclosures.

Where refinance or home purchase mortgage rates go from here is anyone’s guess, but if you are in the market for a new home loan, you may consider dipping your toes in the water here. It has been a great year to lock rates when they dip, which is currently the case for refinance mortgage rates.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Fed Keeps Rates Low – Mortgage Rates Still Steady

The Federal Reserve delivered a vote of confidence in the economy Wednesday, saying it would slow the pace of an emergency rescue program and indicating the recession appears to be ending.

The central bank is keeping bank lending rates near zero and again pledged to keep them there for "an extended period" to nurture an anticipated recovery.

Although bank lending rates do no translate evenly with mortgage rates, it’s still a good sign that will help to keep the current low mortgage rates in check. The two big risks at the moment for a mortgage rate hike would be inflation and/or an increase in the 10 Year Treasury yield.

The Fed continues to report that inflation remains in check both in the short-term and looking forward. As far as the treasury yields go, there could be a dramatic bump upwards if the stock market goes bananas on the economic recovery message. This appears unlikely as we have experienced a dramatic surge in the stock market from the March lows, but never assume anything where investors are concerned.

There are two views on the stock market now. One that exclaims we are going back to the Moon and another that states we will retest the March 2009 lows. The head scratcher is that they both present very good arguments based on both technical and psychological information.

All in all, mortgage refinance rates continue to behave in steady fashion with national average rates on the 30-year fixed still hovering in the 5.375% range. In the past week we did experience some rather volatile back and forth on the treasury yield, but end in a stalemate.

Perhaps the very best of recent news has been the improved housing numbers. Sales are up and it appears to have legs under it. That said, don’t expect home prices to surge any time soon, in fact, we will more than likely experience more down trending in the home value department over the next 6 months to a year.

But, we can finally see the light at the end of the tunnel and housing stabilization is finally in the cards.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Positive Housing Numbers Impacting Mortgage Spreads?

The US housing numbers continue to show signs of improvement as more Americans signed sales contracts to buy homes in June than in May, the fifth consecutive month of increases, according to a report released today.

The Pending Home Sales Index rose by 3.6% in June, which was 6.7% higher than the June 2008 numbers according to the National Association of Realtors.

It’s becoming apparent that the current low home mortgage rates along with a large supply of houses listed at low prices are luring home buyers off the fence to put their offers in. This is truly the first bit of continued positive news on housing in quite some time.

The positive home sales numbers in combination with recent good news on the overall recovery of the US economy may be having an impact on the mortgage spread risk premium, which is a major component of the mortgage rates that are offered to borrowers.

Back in January, when the 10-year treasury yield flirted with 2.0 percent, the national average par or even mortgage rates were hovering at about 5.0 percent for a 30-year fixed mortgage rate. This translated to a mortgage spread premium of almost 3.0 percent, which was much higher than its historic 1.5 percent average. Both the economy and the housing markets were still in free-fall mode at that point so the risk factor had to be imputed into the lender’s quoted home mortgage rates.

At present, the 10-year treasury yield is in the 3.5 percent range, with the national average 30-year fixed par rates holding between 5.35 percent and 5.50 percent. That equates to a mortgage spread risk premium at the 1.85 to 2.0 percent level, which is well off the highs of the early part of 2009.

The significantly lowered mortgage spread premium is most likely due to the improved economic and housing environment, and is keeping both home purchase and refinance mortgage rates steady at very attractive levels.

Continued improvement in the housing markets will result in much more stable home appraisals, and help those refinancing to feel a bit more comfortable come application time.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Home Sales Rise 11% in June

There may be a glimmer of hope out there that the housing market is finally beginning to stabilize. New home sales enjoyed the fastest increase in more than eight years in the month of June, most likely as the result of the federal tax credit, bargain basement home prices and low home mortgage interest rates.

While new home sales are only 15% of total home sales and it’s meaning was undermined by many analysts, the rise in new home sales was strong. June new home sales advanced by 10.98% to an annual rate of 384k units, beating estimates handily. It was the highest level of monthly sales since October 2008 and the largest percentage increase since December 2000 (of course the bounce in June was off of a lower base).

The months' supply of homes available for sale plunged to 8.8 from 10.2. Prices inched lower from May.

Although home prices are still falling, it appears that there has been a bit of a bounce in the housing markets as of late. We have definitely gotten over the worst of it, and need to form a base for home prices before we can ascend to the heavens once again.

Falling home prices in the past two years have been the biggest roadblock for many to take advantage of the ultra low refinance mortgage rates on the market. A healthy mortgage market will definitely help the pull-through rate (or total home loan closings as a percentage of total mortgage applications).

It is still too early to tell whether home prices will begin to flatten out here, but the increase in home purchase activity appears to have some legs behind it.

On the mortgage refinance rates front, we are still in a range bound mode with the national average 30 Year Fixed Rate still hovering between 5.375% and 5.5% for conventional home loans for those with good credit and a loan-to-value ratio at or under 80 percent.

As the economy and housing markets improve, we would expect a decrease to the mortgage spread premium, but that said, the treasury yield will most likely increase in similar fashion, so the whole thing may end up as a wash as far as mortgage refinance rates are concerned.

As long as inflation stays in check, it is possible that we could remain range-bound at current interest rate levels for quite some time.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Mortgage Refinancing Activity Picks Up into Summer

Let the second round begin! After an unprecedented number of mortgage refinance application submissions from this past winter into spring, activity slowed somewhat dramatically in the early part of the summer as home loan rates began to rise.

Refinance mortgage rates approached 5.5 percent for a 30 year fixed rate on a national average basis, and many people felt that was too expensive (it’s all perspective I guess).

Well, the treasury yield became kind once again and dropped almost one-half percentage point from early summer to present, which has been reflected in another dip to interest rates.

With that drop, refinance mortgage applications have picked up once again. Maybe it’s just the homeowners that missed out earlier in the year, and now don’t want to miss the boat, or maybe it’s a whole new crop of people coming to the party. My guess is that it’s a little bit of both.

Federal Reserve Chairman Ben Bernanke testified before congress yesterday, and his comments regarding inflation were welcomed kindly by bond investors. As threat of inflation increases, bond yields go up, so a projection for tame inflation numbers is a good thing for mortgage rates.

All in all, mortgage refinance rates have held pretty consistent over the past month, but the fly in the ointment continues to be home values. There is still no clear-cut housing bottom in sight and continued high foreclosure rates could prolong the agony.

The big hope coming into the summer was that home buyers would come off the fence with the government’s $8,000 first time homebuyer credit incentive, but the numbers remain to be reported. The juicy credit, coupled with very attractive home prices could be just what we need to reduce some of the hefty home inventory.

Mortgage rates are just off the lows of the year, and considered on an historical perspective, are a steal. The big question is whether you will qualify for the cherry programs based on your home value, credit score, and debt-to-income ratio.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Are Your Refinancing Ducks in a Row?

Far too often in the home loan mortgage world, loan pre-qualifications and rate quotes are given out without solid numbers provided by the potential borrower. You know what they say … “Don’t let the facts get in the way of a Great New Home Refinance Loan”.

For those considering a home refinance in the near future, it is in your best interest to gather your pertinent information now, so that your potential new mortgage lender can give you solid pre-qualification program options and interest rates.

For instance, assume you are being pre-qualified based on a loan amount of $200,000 (current mortgage balance) with a $260,000 home value, $2,400/yr property taxes, $600/yr homeowner’s insurance, a 765 credit score, yearly gross income of $40,0000, and monthly household expenses of $200. You would qualify for an under 80 loan-to-value (LTV) refinance at the best current rates available with no private mortgage insurance (PMI) and no requirement to escrow for your property taxes and homeowner’s insurance. In a nutshell, you would pre-qualify for the best refinance deals.

Now let’s assume some of the information given by the borrower in the previous example was just a quick estimation of what he or she felt was accurate, but was not in line with the actual facts.

The home value was based on the purchase price two years ago, but a quick check of multiple online appraisal sites shows that a more likely value is in the $230,000 to $240,000 range. Suddenly, your refinance program options change dramatically as the LTV hurdles over 80 percent. The borrower is now looking at higher qualified interest rates and is required to escrow for taxes and insurance, plus has to pay a monthly PMI. The monthly payment could be several hundred dollars more per month than that of the original example.

Maybe the borrower’s income is not what they thought. Their base salary is $35,000, but they received a one-time yearly bonus of $5,000, so in fact, for loan qualification, the $35,000 figure must be used. Further more, say the borrower didn’t know that student loan payments were included in household expenses, and they amount to an additional $300 per month. Just these two miscalculated items change the borrower’s debt-to-income ratio to a point where the loan cannot be done.

We could go on and on, but I think you get the point … it’s extremely important to gather the most accurate information as possible in your refinance pre-qualification stage.

Also keep in mind that for most part, refinancing borrowers are not mortgage professionals. It is important to speak with a loan professional that can cover all aspects of your loan scenario with you. Mortgage guidelines and underwriting standards are changing all the time, and it’s in your best interest to pre-qualify with a professional for a solid consultation, before you commit into the loan process.

I know, it can be difficult to know whom to trust. Is the lender just out to get a commission or do they have my best interests at heart?

Just like with any other big-ticket product or service decision, you have to get a feel for the person you are working with. Request information about the company and the professional experience of the person you are speaking to if it is not offered up front. Also, request information regarding the lender’s loan process and deposit policy.

If you experience any high-pressured sales tactics, this may be a sign to move on to another lender.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Mortgage Rates Dip on Treasury Yield

In what turns out as good news for lower mortgage rates, the 10-Year Treasury yield has continued it’s downward trend for the past several days. In a big today, the yield is currently down .171 percent, which is a huge one-day move. Expect mortgage refinance rate pricing to get better later today and into tomorrow.

For those that have been waiting for rates to drop, we may be hitting the “sweet” spot in the market on a short-term basis. Both conventional and FHA programs are reflecting some very nice options.

If your refinance timeframe is in the one to three year range, there are many attractive refinance program offerings with no lender fees and some with lender rebates. This could be an attractive and financially beneficial option, especially for those that want to consolidate debts.

If your refinance timeframe is long-term in the five to thirty year range, then you may want to consider some of the “lowest” rates offered options, as the leverage buying power of discount points have also lightened in recent days.

There really hasn’t been much earth shattering news this week to cause a major shift in financing options, but the overall trend in the investment market has been a flight to safety, and hence the dance to bonds and lower treasury yield. How long this will last is anyone’s guess, so locking your mortgage refinance rate here could be a wise decision if your refinance is resulting in a significant benefit for you. Just ask the people who waited to lock when the par or even interest rate on a 30 year fixed mortgage was sitting at 5.0 percent. We are actually nearing a par 5.25 percent now. The getting is good for those that qualify.

Yes, rates are good, but keep in mind that property values are still on the decline. Make sure that you are using a realistic fair market value for your home when applying or even pre-qualifying for a refinance loan. Using an inflated or unrealistic home value can only come back to haunt you later in your home loan process if your home’s actual appraised value comes in low to the point that it either changes your loan-to-value ratio (LTV) and resulting interest rate, or possibly ruins your deal by falling out of the LTV parameters for the loan that you applied for.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Lock Now or Forever Hold Your P&I

I know, I know, this is a cheesy title for the week’s blog entry, but it was inspired with the best of intentions. Since mortgage refinance rates hit their lows earlier this year, there has been a slow and steady drift upward. Mind you, we are still sitting at rates that are unbelievable taking the historical perspective, but none-the-less, not at the rock bottom yearly lows.

I have received an avalanche of inquiries recently from refinancing homeowners about when to lock their rate. Where will mortgage rates go from here? As I have said all along, there is no way to predict where mortgage rates will go as there are too many variables involved, particularly in today’s volatile US economy.

Rate shoppers are thinking, “sheesh, I didn’t lock when 30 Year Fixed mortgage rates were at 5 percent, and now they’re at 5.5 percent and that seems high”. To give a little perspective, last year’s rates at this very same time for 30 Year Fixed mortgage rates were near 6.5 percent!

At current home loan rate levels, the risk of movement is far greater to the upside than to the downside. Consider in the future that we encounter high inflation, continued housing market problems, and a flight out of US Treasuries. These variables alone, which are not out of the picture, could cause mortgage rates to climb rather rapidly, to 6.5 percent, 7.0 percent, or even further.

Now lets take the counter approach and say that the US government announces another buy-back program for bank toxic debt, mortgage backed securities and treasuries. This would cause rates to drop quickly, maybe back to the 5.0 percent level for a 30 Year Fixed rate mortgage.

This brings me to the main point of this week’s lamely titled post. RISK. What are you risking by delaying the lock of your new home loan by waiting for refinance rates to drop further?

If, by refinancing at current mortgage rates, there is little or no benefit for you, then of course it would be wise to wait on the market to see if rates drop further in the future.

On the other hand, if refinancing now creates a significant financial benefit for you, there is a real financial risk for you to delay your lock. Consider that even ‘IF” rates drop down by another one-half percent to match the historic lows of all-time, the net additional gain for your risk will not be substantial (about $60 per month for a $200,000 home loan).

The real pain occurs if rates go up from here while you delayed your rate lock, and never get the opportunity to refinance. As we have witnessed over the past year, mortgage rates can move swiftly and a current beneficial deal can turn sour in a heartbeat.

Citing the previous scenario, assume a borrower can save $250 per month refinancing a $200,000 home loan now. The homeowner would be risking the loss an in-hand benefit of $3,000 per year ($250 x 12) by delaying a rate lock in hopes of hitting the market bottom rate to net an additional savings of $720 per year ($60 x 12).

Anyone in business would tell you that the Risk/Reward analysis for this example weighs heavily in the favor of locking now, while the getting is good.

So, what if I lock at a 5.5% mortgage rate today, a perfect storm news story for rates hits the wires and rates drop to 5.0% tomorrow? Who Cares!

If you make your rate lock decision with sound financial reasoning examining the current risk and reward, you shouldn’t care either, because you made the proper decision for the current financial environment. Plus, you will already be sitting pretty with a better financial scenario at a lower interest rate.

Too many people have been hurt, or I should say, lost out on a significant financial benefit this year by delaying their rate lock for greener pastures. And who could blame them when financial “experts” on CNBC, CNN, FOX, etc, were telling people that rates were going down to 4.0 percent!

Just remember, there is no way to accurately predict where mortgage rates will go. You have to make your refinancing decision based in the “Now” and on your specific mortgage benefit scenario, utilizing Risk and Reward as your guide.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Treasury Yields Down and Mortgage Spreads Up = Flat Refinance Rates

After the battle at the 4.0 percent mark of the 10 Year Treasury Yield on June 10, we have experienced a rather nice retreat by more than ¼ percent in the past couple weeks, yet you may have noticed that mortgage refinance rates have remained somewhat flat in the interim. That is because of the increase in the mortgage spread premium that investors and lenders are adding to the interest rates to make up for their perceived risk of inflation, housing values, and other pesky economic perils.

The good news is that although, the mortgage spread has gone up, refinance rates are still looking very good at present levels.

The bad news is that lender underwriting is getting even tougher and home appraisals continue to drift downward in many home markets. The hardest hit home value states continue to be Arizona, California, Florida, and Nevada.

That is why I continue to harp on home values and how important it is for refinancing homeowners to check among the multitude of free online home value checkers. Even though interest rates are still nice and pretty, it will do you no good if your quoted refinance home loan rate and program is pre-qualified based on a higher than realistic perception of the value of your home. Depending upon the mortgage program you are applying for, your loan rate could go up, monthly mortgage insurance can enter the equation, or your loan could be outright declined if a lower than expected home appraisal comes in.

Of course, most of us know there are no guarantees at what number a home appraisal will come in at, but, you can increase your odds of home value accuracy at the onset by doing a little online research. A good lender will also check value numbers for you before you apply for your refinance loan, but don’t count on it.

Many of you will benefit significantly by refinancing into current low mortgage rates, but the accuracy of your pre-qualified numbers are very important. Accurate information for income, credit and home value at application will go a long way toward getting your new home mortgage closed efficiently, while avoiding potential headaches during the loan process.

Today, the FOMC begins its two-day meeting and mortgage industry is looking for some clarity on its economic outlook. As far as mortgage refinance rates are concerned, look for anything in their upcoming announcements relating to shifts to their November 4 announced purchase plan for mortgages, agency debt, and treasuries. Also look for any insight into how long it will keep current overnight lending rates intact.

The FOMC meeting announcements will result in mortgage refinance rates either going up, going down, or staying flat. Now, if that isn’t a wishy-washy statement, I don’t know what one is! In reality, barring a drastic announcement either restricting or bumping-up their mortgage related purchase plans, I would suspect things to remain even-keel on their announcement.

On the home value front, May existing home sales rose less than expected. Home sales rose 2.4 percent to a seasonally adjusted annual pace of 4.77 million, up from a downwardly revised rate of 4.66 million in April. About one in three homes sold last month was a foreclosure or distressed sale, dragging down the median price to $173,000 -- 16.8 percent below a year ago. Falling prices coupled with new rules for property appraisers have caused many transactions to fall apart or be delayed.

Yes, that pesky home value issue still remains a problem for many that could benefit with current low mortgage rates.

Rate/Term FHA loans continue to be offered at up to 97 percent LTV with conventional type interest rates, and can be a big help to those refinancing in hard-hit home value areas. For those that have a solid qualifying LTV refinance scenario under 80 percent with good to excellent credit, the mortgage rate world is still your oyster.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Small Dip in Weekly Mortgage Rates Meets New Housing Data

For a while last week, there were many nervous refinance lenders and loan officers staring at the yield on the 10 Year Treasury. Intra-day, it pushed passed the 4.0 percent level, but closed below that pivotal mark. Many in the industry believe that a true breach of the 4.0 percent yield level could mean rising mortgage refinance rates.

Since the yield held at the key resistance point last week, we have actually had some nice downward action by almost one-quarter percentage point. Mortgage refinance rates have dipped a bit in movement with the yield as anticipated.

On a more longer-range mortgage related outlook, some key housing data was released today. On the surface, the numbers look great, but a deeper read into the numbers does not fare well for home prices in the near term.

New housing starts in May jumped by 17.2 percent. That nice number is still 45.2 percent below the housing starts at the same time last year. Another seemingly good bit of news was reported that applications for building permits jumped by 4 percent in May, and is usually a good sign of future housing activity.

In more normal times, these would be welcome signs of increased economic activity, but with the huge housing supply overhang already in place and with more supply expected due to heightened foreclosure rates, these numbers are not particularly helpful to a housing market already plagued with depressed prices.

In reality, builders are still being very cautious as home supply continues to build. With foreclosures and other distressed properties for sale at deep discounts, builders often can't compete. Rather than launching new developments, they are waiting for signs of a broader recovery.

This latest news is all the more reason for people considering a home refinance to react quickly to current mortgage refinance rates if their view is long-term, if they need to consolidate debt, or switch to a low fixed rate from a current variable rate home loan.

Why jump now? If home values continue to descend, it could very well knock a refinancing homeowner from reaping a current significant financial benefit, to a future non-beneficial or even non-qualified home refinance scenario.

Couple that with the fact that the future risk to the upside for mortgage refinance rates is much greater than a move to the downside at current levels and I think you get the point.

The key is to speak with a lender that can guide you through a thorough pre-qualification and give you the bottom-line financial options for your current refinancing scenario. It very well could be that your refinancing plans should in fact wait, but if there is true pre-qualified and significant benefit waiting on the table for your now, you just might want to jump into the pool.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Mortgage Rates Rise with Drop in 10-Year Treasury Price

For the better part of 2009, mortgage refinance rates have held their own, almost amazingly for 5 months, but the recent surge in the 10-Year Treasury Yield has caused rates to rise by almost one-half point over the past couple of weeks.

The closing treasury yield on May 1 was 3.174 percent, while the close yesterday stood at 3.858 percent for a total change to the upside of .684 percent for the period. This increase in yield (which is opposite to the bond price) pretty much accounts for the increase to mortgage rates currently being offered.

The national average 30 Year Fixed mortgage rate for borrowers with excellent credit and financing 80 percent or less of the value of their home currently sits at about 5.5 percent.

Remember what I said earlier this year, when the national average rate was below 5.0 percent? I will not say “I told you so”, really…. But, there were many borrowers that refused to lock back then, when the getting was good. The typical “fence-sitting” posture assumed that rates would go down even further. Now, those same refinancing homeowners are either locking at higher rates, in a panic, while there is still significant benefit available, or kicking themselves for not locking sooner. It can be a real stomach turner, when you miss out on a great opportunity.

To those that missed out on the lowest rates of the year, I say, Forget About It! You are not alone, as a good number of refinancing homeowners will typically wait for the lowest mortgage rate offer that never comes.

Now lets go to a reality check timeout. Current Mortgage rates are still an awesome deal for a good portion of US homeowners. Particularly if you are looking to consolidate debt, get out of an adjustable rate mortgage, or maybe want to combine your first and second mortgage into one fixed home loan.

So, where will mortgage rates go from here? I don’t know, and nobody can tell you with any degree of accuracy because there are just too many variables involved, particularly in our current volatile economic climate.

What I can do is relay some pivotal variables to be on the lookout for, pertaining to the direction of mortgage rates.

On the mortgage rate increase side. Continued increases in supply to US bond debt (and ensuing threat of inflation) will cause the treasury yields to increase. The continued threat of major bank implosions will continue the stranglehold on investment capital and hurt interest rates. Continued downside pressure in home pricing threaten rates. Home foreclosure numbers that continue to rise is a major concern. Unemployment rates that reach over 10 percent will help to put pressure on mortgage rates.

On the mortgage rate decrease side. Home value stabilization, better employment numbers, stabilized foreclosure numbers, increased pending home sales and new construction starts, an adopted measure for valuing bank toxic assets, demand in long term US treasuries, and stronger bank balance sheets will all have a positive effect on current mortgage rates. Also, don’t forget the power of the US government to save the day again with some more money thrown at mortgage-backed securities and/or a Fannie/Freddie loan program offering that really helps people to get into a new home with lesser credit score and out-of-pocket money restrictions.

Now, the previously mentioned factors are just some of the major variables, but there are many others, which I hope will let you cut me some slack when I say that I don’t know where mortgage rates are going.

All I do know, is that the risk to rates moving to the upside is much greater than the move they will make to the downside. That is all the more reason to weigh your options carefully when deciding to wait on a current rate lock that is providing you with significant benefit, in hopes that you might be able to get in at a lower rate. Many have been financially hurt with that mindset in the current refinancing mortgage market.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Mortgage Rates Rise with Drop in 10-Year Treasury Price

For the better part of 2009, mortgage refinance rates have held their own, almost amazingly for 5 months, but the recent surge in the 10-Year Treasury Yield has caused rates to rise by almost one-half point over the past couple of weeks.

The closing treasury yield on May 1 was 3.174 percent, while the close yesterday stood at 3.858 percent for a total change to the upside of .684 percent for the period. This increase in yield (which is opposite to the bond price) pretty much accounts for the increase to mortgage rates currently being offered.

The national average 30 Year Fixed mortgage rate for home loan borrowers with excellent credit and financing 80 percent or less of the value of their home currently sits at about 5.5 percent.

Remember what I said earlier this year, when the national average rate was below 5.0 percent? I will not say “I told you so”, really…. But, there were many borrowers that refused to lock back then, when the getting was good. The typical “fence-sitting” posture assumed that rates would go down even further. Now, those same refinancing homeowners are either locking at higher rates, in a panic, while there is still significant benefit available, or kicking themselves for not locking sooner. It can be a real stomach turner, when you miss out on a great opportunity.

To those that missed out on the lowest rates of the year, I say, Forget About It! You are not alone, as a good number of refinancing homeowners will typically wait for the lowest mortgage rate offer that never comes.

Now lets go to a reality check timeout. Current Mortgage rates are still an awesome deal for a good portion of US homeowners. Particularly if you are looking to consolidate debt, get out of an adjustable rate mortgage, or maybe want to combine your first and second mortgage into one fixed home loan.

So, where will mortgage rates go from here? I don’t know, and nobody can tell you with any degree of accuracy because there are just too many variables involved, particularly in our current volatile economic climate.

What I can do is relay some pivotal variables to be on the lookout for, pertaining to the direction of mortgage rates.

On the mortgage rate increase side. Continued increases in supply to US bond debt (and ensuing threat of inflation) will cause the treasury yields to increase. The continued threat of major bank implosions will continue the stranglehold on investment capital and hurt interest rates. Continued downside pressure in home pricing threaten rates. Home foreclosure numbers that continue to rise is a major concern. Unemployment rates that reach over 10 percent will help to put pressure on mortgage rates.

On the mortgage rate decrease side. Home value stabilization, better employment numbers, stabilized foreclosure numbers, increased pending home sales and new construction starts, an adopted measure for valuing bank toxic assets, demand in long term US treasuries, and stronger bank balance sheets will all have a positive effect on current mortgage rates. Also, don’t forget the power of the US government to save the day again with some more money thrown at mortgage-backed securities and/or a Fannie/Freddie loan program offering that really helps people to get into a new home with lesser credit score and out-of-pocket money restrictions.

Now, the previously mentioned factors are just some of the major variables, but there are many others, which I hope will let you cut me some slack when I say that I don’t know where mortgage rates are going.

All I do know, is that the risk to rates moving to the upside is much greater than the move they will make to the downside. That is all the more reason to weigh your options carefully when deciding to wait on a current rate lock that is providing you with significant benefit, in hopes that you might be able to get in at a lower rate. Many have been financially hurt with that mindset in the current refinancing mortgage market.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Pending Home Sales Rise in April – Could be a Good Sign for Home Loans

Yesterday, a somewhat unexpected surprise was reported with the pending home sales report for April. Pending home sales surged by 6.7 percent for the month, which represents the largest jump in nearly eight years.

Now, we all know not to get too excited about home sales numbers for one month’s worth of data, but at least it is a positive sign.

The concern is that home sales will continue to increase into the summer, but that prices will continue to go down. Continued high jobless numbers is also a major concern and could be a barrier to any real short-term sales and pricing momentum.

Much of the jump in home sales is being attributed to the $8,000 first time homebuyer tax credit initiated by the Obama administration this past February. Since home purchases need to be completed by November 30 to claim the credit, we could experience better than expected home sales numbers into the summer.

There are still too many variables involved to call a bottom in the US housing market, but the near-term outlook does look better than it did even a few months ago.

How do home sales affect my home refinance plans? Well, home sales affect two major components of a refinance mortgage. Home value and interest rate. Generally speaking, the higher volume of home sales, the more the demand, and eventually the higher the price. This of course affects your home’s “appraised value” which is use to qualify your Loan-to-Value ratio (LTV). A home value difference of as little as $5,000 to $10,000 or so can change your qualified home refinance options significantly for mortgage rates. Also, you may fall into the “above 80 LTV” range and be required to pay monthly mortgage insurance. That relative small home value difference to the downside can result in a rather large increase to your monthly refinanced mortgage payment.

As far as mortgage rates go, a stabilized or increasing value for the housing market makes lenders feel a little bit better about lending funds. Their risk declines and they lower their mortgage-spread premium to remain competitive with all the other lenders that now want to make a more secure profit. So more liberal programs may be offered along with a decrease to offered mortgage rates.

So, even if you don’t care what home sales do because you already own your own home, keep an on the home sales numbers just in case you are considering a home refinance. The better the numbers, the better your deal may become when you are ready to get that new home loan.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Treasury Yield Creeping Up While Mortgage Refinance Rates Level

The 10-Year Treasury Yield has breached 3.5% to the upside intra day, a level we have not witnessed since last November. Part of the reason for the reversal in fortune is due to the major upswing in the stock market off its 2009 lows. As investment money flows back into stocks, it is taken out of government bonds. Also, the government bond buy-back program is running its course as of late. As more US bond supply hits the market (to pay for the immense government spending programs), bond prices continue to drop and the yield increases.

Normally, a significant rise in the 10 Year Treasury Yield would result in higher mortgage rates, but this latest bump-up in the yield has been tempered by what appears to be a drop in the mortgage spread premium, which is keeping refinance rates at nice levels still.

With that said, it might be a good time to lock that rate now, if you are qualified for a current mortgage rate producing a nice financial benefit for you. If the government does not announce any more buy-backs or toxic debt fixes in the near future, interest rates could go up rather sharply because the housing and job markets are still projected for further pain.

U.S. home prices are at levels not seen since the end of 2002. The Standard & Poor's/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter 2009 compared to the first quarter last year, the largest drop in its 21-year history. Home prices have fallen 32.2 percent since peaking in the second quarter of 2006.

Unfortunately, there is still no evidence of a bottoming in the housing markets.

That’s the bad news, but for those with equity in their homes, refinancing into lower rates is still looking great. Remember that for cash-out refinances, you will pretty much be limited to 85 percent of the value of your home. For higher LTV Rate/Term refinances, FHA is still offering great mortgage rates at up to 97 percent of the value of your home.

If you are considering a refinance now and need some help, have questions, or need some competitive 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!

Refinance Tool Box

Refinancing and Break Even Analysis

Too often, refinancing homeowners will take one look at the closing costs total on their good faith estimate and run to the hills, exclaiming that they are “too high”, before they actually examine the whether the proposed new home loan will be a benefit for them or not.

One thing is for sure. Everyone wants the lowest mortgage rate possible, but that “lowest” rate available will come at a cost called “discount points”. Now, discount points get a bad rap, but they can actually end up being your best friend if you plan on staying in your new mortgage for the long-term.

But, you don’t even really need to bother yourself with how many discount points are included in your quote to figure your net benefit or non-benefit for the loan. This can be determined rather easily by using “Breakeven Analysis” to get down to the bottom line.

For example, suppose you have a lender quote and good faith estimate for a shiny new low interest rate. Forget how many points, fees, and all that stuff. You need to pay attention to the bottom-line closing costs. Bottom line closing costs include everything on your good faith estimate except any estimation for property tax escrow deposits, homeowner's insurance (and homeowner's association dues if applicable) escrow deposits, and pre-paid interest estimations. That leaves you with the true cost of the loan.

So, your bottom line closing costs amount to $6,500 for a super low mortgage rate that is going to save you $250 per month. Divide the cost ($6,500) by the monthly savings ($250) to result in your Break Even Point of 26 months. If you plan to stay in your new mortgage for more than 26 months, this is a good deal. If not, then you might want to pass on that deal. Yes, it is that simple!

In many cases, a little bit higher interest rate with lesser fees is a better overall deal when the borrower’s timeframe is relatively short. But now that you know the breakeven analysis method, you can figure out different options within minutes and pick the best deal for you. It can also prevent you from making a financial mistake when the overall figures do not work in your favor. The numbers don’t lie.

With that said, mortgage refinance rates have been rather consistent for a second week in a row. This is a good thing when interest rates are near historic bottoms as they stand at the moment.

If you need a quote or someone to go over your specific refinance scenario, including a breakeven analysis, don’t hesitate to call or request a quote online with the Refinance Tool Box. We are here to help and never use the high-pressure sales tactics that many refinancing homeowners encounter.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Calm, but Good Week For Mortgage Refinance

During the past couple months, it seemed like a new major event was occurring each week relating to home loan refinance. Big news on government plans causing rates to plummet, while loan program restrictions increased. Housing values, construction numbers, employment, and the stock market bounce caused quite a joy ride on the refinance front.

It’s nice to catch your breath every once in a while, and the past week has allowed just that. Mortgage rates had been steadily rising off the 3.0 percent breach of the 10-Year Treasury Yield, but the last several days has brought a reprieve for the rate sensitive consumer, allowing them to lock rates at near all-time lows once again.

On the home value front, The National Association of Realtors said today that the median sales prices of existing homes declined in 134 out of 152 metropolitan areas compared with the same period a year ago. Prices rose in the other 18 cities. The median home sales price nationwide was $169,900, down 13.8 percent from a year ago. The median price is the midpoint, which means half of the homes sold for more and half for less.

It is expected that home sales will increase into the second half of this year, and that could finally bring the brakes to falling prices. Home price stabilization would be just the kick-start we need for a healthy home mortgage lending environment and a revitalized economy.

I keep getting the question “Are rates going to drop further”? Unfortunately, I do not know whether they will or not. There are too many major variables (currently volatile) involved to give any mortgage to give a prediction with any degree of accuracy at all.

About the only thing that I do know for certain is that mortgage rates are currently at historic low levels for conventional and FHA refinancing programs.

Remember though, the best deals for conventional are for 80 LTV and under loans for those with good to excellent credit. FHA also has great deals for over 80 LTV loans for those with a 620 mid credit score or higher, but the cap LTV for a cash-out refinance is at 85 percent, while a regular rate-term FHA refinance remains at 96.5 percent.

Holding off now for lower rates in the future could be a risky proposition on your part if you are pre-qualified on a program providing significant benefit. My suggestion is to lock while the getting is good and not worry where rates go from there. Waiting for a slight decrease in mortgage rate is too much of a risk to take when you are sitting on a current good to excellent refinance benefit scenario.

May the Mortgage Refinance Rates be with You!

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