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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FHA Refinance and the Upfront Mortgage Insurance Premium (UFMIP)

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

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

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

Is the UFMIP a closing cost?

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

Does the lender get this money as a profit?

No. The UFMIP goes to the HUD department.

Does the UFMIP count toward the qualifying LTV?

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

Should I include the UFMIP in my Breakeven Analysis?

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

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

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

I hope this helps!

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

May the Mortgage Refinance Rates be with You!

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Mortgage Refinance Rates Drop on Week

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

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

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

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

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

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

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

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

May the Mortgage Refinance Rates be with You!

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Current Steep Bond Market Yield Curve can affect Mortgage Refinance Rates

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

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

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

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

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

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

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

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

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

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

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

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

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

May the Mortgage Refinance Rates be with You!

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Mortgage Refinance Rates Set Another Record Low – How Long Will it Last?

The mortgage refinance rates environment hit another record low last week. The average interest rate for a 30-year mortgage dropped to a record low of 4.71 percent. The previous record of 4.78 percent was set during the week ending April 30 and matched last week. The average rate on a 15-year fixed-rate mortgage fell to a record low of 4.27 percent, from 4.29 percent last week, according to Freddie Mac.


As the Federal Reserve continues to pump funds into mortgage-backed securities, rates have continued to drop. The continued rush of investors into the security of US Treasuries has also lent a heaping dose of rate drop in recent weeks.

In the face of recent historic low refinance mortgage rate news is the loan qualification question for many homeowners. Refinancing lenders have tightened their standards dramatically over the past year. Credit score and loan-to-value (LTV) requirements have tightened, while “stated-income” and other reduced documentation loan types have disappeared from the refinancing landscape.

Home prices have fallen, and it is estimated that 23 percent of homeowners with a mortgage, owe more on their home loans than their house is currently worth according to First American CoreLogic, a real estate information company. This is creating a major qualification problem for many American homeowners that could benefit significantly with a home refinance at current mortgage interest rates.

Those that do not qualify for an 80 percent LTV refinance home loan with excellent credit scores should check out an FHA refinance. The FHA loan program currently allows a homeowner to finance up to 97 percent of the value of their home with a qualifying mid credit score as low as a 620. In fact, many borrowers have switched from conventional mortgages to FHA refinance loans for significant savings and benefit at the current low historic refinance rates.

So, how long will mortgage rates stay this low? For those that follow the Refinance Toolbox Blog, you will know that we never predict where mortgage rates will go, but report on the current events impacting interest rates and future events that could move mortgage rates in a significant fashion.

Putting on our “common sense” hat for a second, it would appear that further future reduction to mortgage rates will be minimal at best, with a likelier probability that interest rates will rise. The rise in refinance rates could be significant.

An improving economy could lend itself to a dramatic increase in the 10-Year Treasury yield. The yield has held at historic lows for quite some time as investors like the security during national economic turmoil while inflation is kept in check. As the treasury-yield goes up, mortgage refinance rates will rise.

Current mortgage rates have been kept artificially low due in large part to the US government bailout plan, in which the Federal Reserve is spending $1.2 Trillion to buy-up mortgage-backed securities. This program is due to end in April, 2010, and could have a significant impact to rising mortgage rates.

Although inflation numbers have been kept in check for the moment, a future inflation jump could lend a helping hand to rapidly rising refinance mortgage rates. Many are concerned that the government’s bailout effort will lead to significant inflation down the road. The feeling is that too much money has been printed, which will cause some major inflation problems at some point.

Well, should I lock my rate now?

After a solid refinance pre-qualification, it would not only be a good time to lock your interest rate, but a great time to take advantage of the lowest mortgage rates available since the number has been tracked. The risk that mortgage rates will rise significantly is much greater than the risk that you will lock as rates continue downward.

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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Historic Low Refinance Mortgage Rates – One Benefit of a Sluggish Economy

The US economy has seen better days, and to say that our country is in a bit of an economic slump would be an understatement. The jobs picture is as bad as we have encountered in quite some time, with no relief projected for the immediate future.

In fact, much of our middle-income America has had to stomach dramatic declines in their retirement accounts, while the cost of food and energy continues to soar. The wealthy can absorb hits to long-term savings, but the less-than-wealthy people experience a much heavier burden.

I know, that’s all you want to hear is about more economic doom and gloom, and a rehash of the downward spiral in many of our retirement savings accounts.

Duly noted. That is why I would like to switch the focus to a shining star that has come out of our country’s economic mess …. Historic Low Refinance Mortgage Rates!

For many homeowners that are looking to lower their monthly payments, consolidate debts, or lower their loan terms, current mortgage interest rates paint a rosy picture. This is not meant as a sales pitch, but many people are taking advantage of the current rates and realizing benefits in the ten’s of thousands to hundred’s of thousands of dollars in savings over the term of their new home loans.

The point is, that it could be in your best interest (excuse the pun), to see if there is a refinance loan program that will result in a significant benefit for you.

The US government, in it’s bailout efforts, has helped to create our current historic low mortgage interest rates, but that aid is coming to an end soon. Both the government’s buy-back of US Treasuries and mortgage securities are slated to be complete by the early part of 2010. This could present a double-whammy effect on refinance mortgage rates as the 10-Year Treasury Yield could rise in conjunction with a rise in the mortgage spread premium. Yes, mortgage rates could rise significantly in the near future.

Although I don’t predict where mortgage rates will go, one cannot be blind to major headwinds coming around the corner. This reminds me of the old saying to “Strike While the Iron’s Hot”. My new, although not as catchy saying is to “Strike While Mortgage Rates are at Historic Lows because there’s little room left for rates to fall, but a whole lot of room to Go Up”. Yeah, I know, it’s a little lengthy, but I’m working on it!

Keep in mind that if you are planning on taking advantage of the current low refinance mortgage rates, you will need to have a minimum 620 mid fico credit score for either a conventional or FHA loan.

Also, make sure to check online at some of the free home value estimation sites so that you can get a general idea of the value of your home. The housing market is still kind of crazy, so you don’t want to go into the refinance process with blinders on.

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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About Low-Ball Mortgage Refinance Rate Advertisements

If you have ever shopped for a new car, then you know that the low low advertised price for your auto of choice may not necessarily be the same as the price you are quoted at the dealership. Hey, you want tires with that? Oh, your credit score isn’t over 800? I think you get the point, and unfortunately, many mortgage refinance rate advertisements are not any better.

I just received a mortgage rate advertisement in my email inbox this morning from a major mortgage lending company that gave me a chuckle. The subject line says “Rates drop to 3.59% APR*. Then the message goes on to make sure that I know that I should lock my rate now, before rates rise. Now, those are some really nice folks at that loan company, making sure that they are looking out for my welfare.

Unfortunately, the 3.59% APR asterisk marking does not tell me in the email, what the 3.59% program is, or what the qualifications are. You guessed it, it sounds like the ole Crazy Lenny’s Auto World Emporium sales pitch all over again.

In reality, they probably do have a 3.59% refinance program available, but it’s most likely for an adjustable rate mortgage (ARM) for people refinancing with superior credit and a loan-to-value ratio that is under 80 percent. Heavy discount points are applied, so the lender fees are quite substantial.

Why don’t they just mention that in the advertisement then? Well, I think you’ve got it. First, most people do not want to touch ARM loans any more. Secondly, most people do not have superior credit. Thirdly, most people are refinancing over 80 percent of the value of their homes. Finally, they know that a lot of people would not take kindly to a large lender fee quote.

So, you haven’t visited the Refinance ToolBox, and don’t know these little advertising tricks and decided to apply for this great 3.59% APR refinance home loan. You want a 30 year fixed mortgage, have a decent credit score, and are refinancing 85 percent of the value of your home.

What’s This? You are now told that you are not eligible for a 3.59% APR home loan, and that your real qualifying rate is over 5.0%!! (A 5.0% is actually a great rate that can provide a substantial financial benefit for many refinancing howmowners, but why not just be upfront in the advertisement?)

As the steam evaporates from your forehead, you realize that you’ve been duped. Don’t worry about it, you have a lot of company.

The important point to remember is that you should be very leery about advertised mortgage refinance rates that seem too good to be true, especially if there is no small print in the ad that states what the program is, and what the basic qualification requirements are.

Finally, the question you have to ask your self is …. Do you even want to work with a home loan lender that resorts to trickery in their advertisements, just to get you into their virtual doors? I don’t know about you, but I think I’ll take a pass!

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 Near 5.0 Percent

The steadiness of mortgage refinance rates over the past month or so has been a welcome change from the interest rate roller coaster ride experienced over the past couple of years. In fact, we are now near the historic low home loan rates of Spring 2009.

There seems to be a standstill at the moment as the unsettled economy is drawing investors into and out of the security of treasury bonds, maintaining the low yield in a tight range and keeping refinance mortgage rates a nice bargain.

Home values and credit scores continue to be the major determining factor for qualification into these great rates. FHA refinance home loans continue to offer low rates to those with credit scores as low as a 620 mid fico and you can have a loan-to-value (LTV) ratio up to 97 percent.

For those looking for conventional loans with no PMI, your home value will be critical. Don’t forget to include your closing costs into your total loan amount in calculating your qualifying LTV if you are not paying for closing costs out of pocket. You will need to be at an 80 percent LTV or lower to eliminate PMI.

The housing value picture is still muddied, but looks a whole heck of a lot better than it did even a few months ago. The latest home sales numbers have been rather positive and we have even experienced home values increasing in many markets…. Hip Hip Hooray!!

Now, before we pop the cork on the champagne, there are also some troubling housing market variables that lurk around the corner. There are apparently a huge number of distressed homes waiting to hit the sales market. Banks have been holding these foreclosed homes for various reasons, but they could soon hit the sales listings. This could be a big hit to an already unsettled outlook.

Not to mention the jobs picture. Unemployment numbers continue rise as corporations work to improve their balance sheets. This is also putting a damper on housing activity.

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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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!

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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!

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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

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

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!

Refinance Tool Box

Loan-to-Value and Locking Mortgage Rates While the Getting is Good

Home loan shoppers ask me all the time … “Should I wait to lock my rate? Aren’t mortgage rates supposed to drop again?” My pat response is to ask my client whether they are willing to risk the benefits available to them now in the event that rates do not drop, and possibly go up, possibly causing them to lose future benefits and maybe scratch the refinance plans altogether.

If the history of financial reporting relating to mortgage rates is any indication, you actually might want to wait to lock your rate if the pundits exclaim that interest rates are going up…(laughter fills the room). All bad jokes aside, there is no way to predict with any degree of accuracy, where mortgage rates will go. In fact, at the present, we are near all-time lows for mortgage rates. If you already have a significant benefit available at the current low rates, how much do you think rates will fall, if they do drop again? Most likely, rates will not drop much further from the lows of this year.

It’s boils down to risk and reward when it comes to locking your rate. Depending upon the current benefit available and the current state of mortgage rates, the borrower stands to risk a large benefit by delaying a rate lock for a relative small reward if rates drop further.

Declining home values across the US are create another valid reason to lock your rate while the getting is good, and the timeframe for you new home loan is long-term.

The continued decline in home sales, makes each current home sale (sale of a comparable home to yours) in your area, that much more critical in how it affects the appraisal value of your home. For instance, if home sales in your area have been low for the previous 12 months and a couple foreclosure sales come through at rock bottom prices, your home stands to lose appraisal value for refinance Loan-to-Value (LTV) qualification purposes.

It is not uncommon that people wait to lock and their home value declines in the interim, raises their LTV, and makes the current refinance program a worse scenario than if they had locked when market mortgage rates were higher.

The LTV grading tiers for qualified interest rates are tightening, which makes home value a crucial decision point for rate lock decisions. Not to mention the huge impact of a declining home value for the homeowner that is currently at or near an 80 percent LTV.

The recent lender reductions in refinance cash-out caps, also makes home value king for qualifying LTV’s near 85 percent.

The moral of the refinancing story in today’s market is that if you have a pre-qualified loan program that gives you the benefit that you want or need, it would be wise to think twice about risking your “Bird-in-the-Hand”, for visions of a future drop in mortgage rates.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Cash-Out Refinance and Further Lender Tightening

Just last week, it was announced that the Cash-Out cap for FHA refinance loans would be reduced to 85 percent of home appraised value (LTV). Now, it appears that many conventional loan programs are following suit and reducing Cash-Out amounts as low as 80 percent for some lenders, even for those with excellent credit.

The lowered cash-out limits may be a direct reflection of continued downward pressure on home prices across the nation, but may also reflect credit-tightening measures by lenders battling in a cash-flow conscious industry.

Mortgage rates are still at excellent levels, particularly for those refinancing less than 80 percent of the value of their home with good to excellent credit.

The bigger picture for future low mortgage refinance rates and higher LTV limits will be heavily dependent upon two crucial factors.

The first is home value. Until the housing market stabilizes, banks and investors will continue to be strict with their funds, limit LTV limits and charge a higher-than-normal premium on interest rates for risk associated with home value.

The second is lender liquidity. An agreed upon method for valuing toxic assets held by banks (namely mortgage related investments) has yet to be found. Private investors (backed by the US government) are willing to buy these risky assets, but their price is much lower than what the banks are willing to sell them for. This story has been playing out for months, and a resolution does not appear in the cards any time soon. If the banks ultimately end up unloading these pesky liquidity killers, their balance sheets will allow a much more robust dive into mortgage lending.

It’s almost like the chicken and the egg… which one needs to occur first? It’s tough to say, but if the banks are able to unload their toxic assets, offered home purchase programs could become much less restrictive than current, drive competition among lenders, and bring an influx of willing and able buyers to the home-purchase closing table. Home supplies will decrease to meet an increasing demand and home prices could stabilize.

Let’s hope that an agreed-upon valuation method for toxic assets occurs soon. It would be a huge help for home values and mortgage financing opportunities, especially for those that require high LTV refinancing or home purchase mortgages.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

FHA Temporarily Reduces Cash-Out Refinance LTV

Effective for April 1, 2009, the loan-to-value (LTV) of any cash-out refinance to be insured by FHA may not exceed 85 percent of the appraiser’s estimate of value. This restriction refinances is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken.

It appears as though the US Department of Housing and Urban Development (HUD) is all too aware of the declining home values across the United States and is looking to limit their exposure for the cash-out refinance loan scenario. Hopefully, the previous 95 percent loan-to-value limit will be reinstated at some point down the road.

The current FHA 96.5 percent LTV limit on Rate/Term refinances (refinancing your existing mortgage only) has not been changed.

In a somewhat rosy on the surface report issued today, sales of existing home sales rose 5.1 percent in February, the largest increase in nearly six years. Unfortunately for property values, the increase is being attributed to falling home prices and mortgage interest rates.

There is a debate as to whether the housing market will begin to heat up into 2009. On one side, you have the folks that feel current low home prices and low mortgage rates will bring the offers in. The other side thinks that continued mounting job losses and declining incomes will keep people on the home-buying sidelines. New housing starts are still dismal, so it may be a stretch to call a housing market bottom this year.

On a bright note, the 10-year Treasury has declined a bit on the week and mortgage rates are still looking awesome.

If you are thinking about refinancing now, and plan to stay with your new mortgage for the long term (at least 5 years or more), now might be the time to act if you have a good credit score and are near that 80 percent loan-to-value ratio. The reason being that home values have been very volatile by area. Just one or two recently purchased foreclosure or rock-bottom priced homes in your area could bring the appraised value of your home down quickly, and possibly out of the “Under 80 LTV” sweet spot for refinance rates.

Many homeowners in the refinance market feel that rates will drop further and are holding off for even lower rates. This could prove costly if the value of their home drops in the meantime, and results in an “Over 80 LTV” refinance scenario.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Fed’s $1.2 Trillion Announcement Great for Mortgage Refinance Rates

Last Wednesday, the Fed announced a bold new effort to lower interest rates on mortgages and other consumer credit. The Fed announced that it will spend up to $300 billion for long-term government bonds, plus an additional $750 billion for mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

On this news, the 10-year Treasury yield dropped by almost one-half percentage points and mortgage refinance rates dropped almost immediately. Since the initial rate-drop off the news, the market has been moving sideways, with maybe a slight blip up in rates.

You know how they say that you usually don’t get a second chance? Not this year. Those that were sitting on the refinancing fence in January and missed out on the big rate drop now have the chance to refinance at awesome interest rate levels once again.

The government’s announcement on Monday for a plan to buy back toxic bank assets really didn’t cause much movement in mortgage rates. Most likely, last week’s rate drop already had that figured in to the mortgage spread premium.

The latest released numbers on per-existing home sales and new home sales shows the first percentage increases in months, but it’s way to early to get excited about that. The underlying numbers are still dismal and on the pre-existing home sales side, a large percentage of the increase is attributed to foreclosure sales at rock bottom prices, which is continuing to hammer on national home sale prices.

Yes, mortgage rates are great, but remember that the very best offered rates will be to those refinancing conventional with good to great credit and a loan-to-value (LTV) ratio under 80 percent. The value of your home and credit score is key!

FHA mortgage rates are still the way to go for LTV’s over 85 percent (even over 80 percent in some instances). The qualifying credit scores for FHA loans seem to be creeping upward from the 580 minimum score requirement for many lenders, but offer great rates for those in the 620 credit score range and up.

Many people shopping loans right now feel that rates will drop even further, so they are waiting on the fence. Unfortunately, many people get burned with this rationale, trying to pick the bottom. Same as the stock market, those who try to pick the bottom either end up with no transaction or end up buying at a higher than originally available price in panic as the market moves up.

The bottom line is that if you have a current offered loan scenario that creates a significant financial benefit for short-term goals and for your long-term horizon, it’s better to lock now and forget about picking the bottom. Yes, rates could drop further, but is it worth the risk of forgoing a beneficial loan in hand, on the gamble that rates might drop by another quarter to half percent? That is a big gamble, especially when considering where mortgage rates are at currently.
May the Mortgage Refinance Rates be with You!

Refinance Tool Box

FHA Mortgage Refinance Credit Score Qualification Creeping Upward

It appears that banks and lending institutions are becoming even more stingy with their money, not only as it relates to business and short-term lending, but also for mortgage loans. One of the bigger shifts in qualification standards for refinancing homeowners pertains to the FHA loans program.

Throughout the subprime meltdown, FHA loans appeared to be the saving grace for many borrowers, as it allowed people with poor credit to get refinanced at awesome refinance rates, and up to a 97 percent LTV to boot.

Even though FHA loans are not technically credit score driven, the actual lenders underwriting and funding the loans have a minimum credit score limit that they will accept in order to qualify for the mortgage. That low limit was set at a 580 score throughout 2008 and for the beginning months of 2009. Unfortunately, that lower limit threshold has drifted upward for most lenders. As of this moment, most refinancing homeowners will have to have a minimum 600 to 620 mid fico score in order to qualify for an FHA loan.

There are most likely some lenders out there that will accept the older scoring limits, but my best guess is that you will have to pay a premium with a higher qualified mortgage rate, than the current market is bearing for the same loan scenario with a 600 to 620 credit score.

Yes, FHA rates are still great for lower qualified credit scores, but I’m afraid that a rather large percentage of poor credit score homeowners will be left out in the cold when they try to refinance.

If you find yourself with a sub 600 credit score and really need to refinance, especially if your major motivation is for cash-out or to consolidate debts, then you might want to consider the aid of a credit restoration company. Many times, credit reports have false information or negative items that can be removed. A credit repairer can take care of these items rather quickly and possibly have your score raised into refinance qualification range within 90 days or so.

If you do contact a credit repair company, make sure that they go over your credit report with you first, and also let you know if they can raise your score to the appropriate level, along with the timeframe anticipated to do this. There are many credit restoration companies that are long on fees and short on results. A reasonable fee should be no more than $300 to $400 for a year’s service for one individual.

Also consider that an improved credit score not only helps with mortgage qualification, but also for all other financial (credit related) matters, and even job opportunities.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Home Price Drop Effect on Refinancing Your Home

Standard & Poor's/Case-Shiller home price index released on Tuesday reported that prices of U.S. single-family homes plunged 18.5 percent in December from a year earlier as the monthly pace accelerated. There seems to be no area immune from the downward trend. As to add insult to injury, since the housing market peak in the second quarter of 2006, home prices have plummeted 26.7 percent, on average.

So how does this effect the refinancing of my home? Well, for some, it will have little or no effect, but for others, it can mean the difference between a great rate and a good rate, or even downright non-benefit for the homeowner.

The key number is 80 percent. That is, for those refinancing 80 percent or less of the value of their home, they will be eligible for current low advertised refinance rates. But, as you move up above the 80 percent ranks, interest rates will move upward and mortgage insurance will be added to your new monthly payment. Depending upon the loan scenario, this can create a no-win end game for those financing well over 80 percent of their home’s value.

But hey, this is the time to be checking on refinancing if you are looking for low rates. Rates are still near all-time lows and you may stand to receive substantial benefits by refinancing now. If you have a good idea on the value of your home and the numbers show that you would be refinancing less than the 80 percent key value, it is definitely worth a look.

Yes, credit scores also play an important role for the great offered rates. Those with credit scores above 720, coupled with a loan-to-value ratio under 80 percent are in the greatest position to close on current low refinance rates.

So, what about us refinancing over 80 percent of the value of our home, with sub 720 scores to boot? Glad you asked.

FHA refinance loans are definitely the way to go for high LTV loan scenarios and for those with credit scores in the 600 to 720 fico range. The qualified rates are almost as good as current prime conventional loan rates for those under 80 LTV and with great credit. So there is a place for most homeowners to cash-in on low refinance rates.

Again, home value is key. Have a good idea about the value of your home before getting a quote. If you are below 80 LTV for your loan scenario, then you are in good shape. Above an 80 LTV, then you will want to get a comparison between prime conventional home loan rates and FHA refinance rates.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Refinance Rates Remain Low as Discount Point Spreads Shrink

The good news is that mortgage refinance rates remain at low levels and appear that they may be stable for a while. The other rate related news is that discount point spreads have shrunk for 30 year fixed rate mortgages, which could add more benefit to those refinancing and staying with their new mortgage for at least 5 years.

In general historical terms, one discount point would reduce a borrowers interest rate by an amount between 1/8% and 1/4%, depending upon the lender and the loan scenario. So, if you were refinancing say $200,000, it would cost you $2,000 for each discount point applied to buy-down your rate. For at least the time being, that same $2,000 will most likely decrease your interest rate by more than1/4%, which is huge for those wanting to refinance for the last time. The reason for this shrinkage in discount point spread is because the base par mortgage rates are already currently low, so low that lenders at betting that those refinancing will stay with their new mortgage for the long haul, and the banks will collect the mortgage interest for many more years than for home loans taken out earlier this decade. The lower your fixed rate, the longer you will most likely stay with the loan, so the less charged to buy down.

Oddly enough, even with the current low mortgage refinance rates, they could be lower. With the 10 Year Treasury Yield hovering between 2.0% and 2.5%, historical mortgage spread premiums would dictate a 4.5% par rate on a 30 year fixed mortgage, yet the national averages are currently over 5.25%.

Mortgage spread premiums are generally in the 3% range currently, which is at a very high level. The reason? Current lender staffing levels are one major culprit. Most lenders are bursting at the seams with new mortgage applications because of our sudden and deep rate drop, after suffering through severe downsizing in the industry. By keeping rates up a bit more than they have to be, lenders can offer historically low interest rates, do less loans, and make the same money with a higher profit margin.

Though the spread is high, most will experience a nice financial benefit by refinancing at the current rates if their current mortgage rate is 6.5% or above. For those with less than perfect credit, the FHA loans programs are also offering incredible value at the present time.

The biggest hurdle to getting those sweet low rates is coming down to home values. If you have adequate equity in your home, the mortgage rate world is your oyster, even with poor credit scores, as long as your score is at the 580 or above. Those that have great credit scores and little equity in their home should also check out the FHA refinance loan option, as you can finance up to 97% of the equity in your home and still get near conventional grade pricing.

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Rates Remain Solid Into Holiday Season

If you have been waiting for rates to drop in order to refinance your home loan, consider current refinance rates as your early Christmas present. Par 30 year fixed rates are still hovering in the 5 percent range, which can provide huge benefits to those currently at 6 percent or higher, and looking to either reduce payments or shorten the term of their mortgage.

Just remember that the primo rates are being offered to those refinancing with a loan-to-value of 80% or lower and excellent credit scores. Although mortgage programs across the board have dropped, the previous scenario mentioned is where you can really rake in a nice drop in rate.

For those that have a high loan-to-value ratio and/or poor credit scores, FHA refinance programs are not far behind conventional pricing and still offering great rates.

If you are still on the fence waiting to unwrap that mortgage present this holiday season, consider the following. Bottom line, how much will I lose if I do not lock a rate now? Secondly, and very important… How long do I plan to stay in a new mortgage if I lock a low rate? For instance, if you can save $200 per month by locking now and it costs $4,000 in closing costs, you will break even in 20 months. Now, after 20 months, you will make out with a free and clear $200 per month savings and net a total interest savings of $68,000 over the term of a 30 year mortgage. Now that’s some Christmas cheer!

Home values continue to plague many looking to refinance as home prices continue to fall. The National Association of Realtors said today that existing home sales fell 8.6 percent to an annual rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October. Just as important is the fact that sales of distressed properties made up 45 percent of all property sales in November. That is a bad sign in the short term, but may prove to at least stabilize home prices going into the new year.
The Treasury yields are still ultra low, while the mortgage spread remains at very high levels. Expect mortgage rates to hover in the current range for a while, unless the yields have a strong bounce, in which case rates will rise close to the increase in the 10-year Treasury yield. If you are undecided about locking a rate now, consider that we are still near historic lows and you could stand to make a nice long-term benefit for rate-term refinances and a significant monthly savings on a debt consolidation loan.
Merry Christmas!

May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Rates Blasting Lower with Fed Cuts to Boot!

The way mortgage rates have dropped recently is really quite remarkable. We are witnessing par interest rates in un-chartered territory thanks to recent government moves and the action in the Treasury markets. I never thought we would see it, but the 10-year Treasury yield is nearing 2% as we speak! This is great news for those in position to refinance, as rates are as low as they have ever been. The mortgage spread premium is still quite high, but the mortgage-backed securities after market suggests that we may at least experience continued lender activity in the market.

Yesterday, the Fed announced another sharp rate cut. The Federal Reserve cut its federal funds rate target to a range of zero to 0.25 percent. This unprecedented move is aimed at boosting borrowing and lending amidst our current poor economic conditions.

Inflation numbers were released, and we are looking great in that area. Prices dropped by 1.9 percent, most likely due to the drop in oil prices.

Also, yesterday, the housing starts report was released and the numbers were dismal. New home starts fell to a seasonally adjusted annual rate of 625,000 from a downwardly revised level of 771,000 in October. That is a drop of 18.9 percent, the steepest since March 1984. The total is far below the 740,000 pace that Wall Street economists expected. Now, this may appear to be horrible news for the housing markets, but let’s take a positive spin. The report is indicating that the supply of new homes is decreasing, which can be great news for those selling homes and those that are refinancing. Couple a drastic cut in mortgage rates with a declining home supply and we could set up for positive days ahead on the home valuation front.

One of the biggest details blocking potentially positive refinance scenarios has been the value of homes. They are either knocking those refinancing out of the game or bringing loan-to-values too high to make a significant financial benefit for some.

All in all, I’d say the refinancing and mortgage markets are setting up for better days now and ahead. The bottom line is that refinancing home loan consumers stand to benefit in a big way with the current low rates, as long as they have decent credit and adequate equity in their homes.


May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Mortgage Rates Tumble on Government Mortgage Backing Announcement

Yesterday was a good day for the home mortgage market. Rates tumbled by one-half percent for a couple of very good reasons. First, the government announced that it will now guarantee Fannie and Freddie debt, which are the bonds that they offer to finance the mortgages they purchase. Secondly, the government also announced that it would purchase up to $500 billion of Fannie, Freddie, and Ginnie securities. These announcements, in conjunction with a 10-year Treasury yield drop of almost one-quarter percent caused the perfect storm for a nice drop in mortgage rates.

With these broad government moves, the mortgage industry has become much more stable overnight. Expect the mortgage spread premium to finally decline from its high crazy level of 3.15%. This may be the big stimulus we were hoping for to entice home buyers off the fence and allow homeowners to refinance into significant benefits.

30 year fixed rates are now being offered at under 6 percent for a par rate, a huge move to the downside in a short period of time. We have even seen flashes of 5.5 percent rates for conforming loans at 80 LTV and great credit.

While rates are now back at bargain basement prices, home prices are too. The National Association of Realtors said Monday that sales of existing homes fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October, from a downwardly revised pace of 5.14 million in September. The median sales price plunged 11.3 percent from a year ago to $183,000. That was the largest year-over-year drop on records going back to 1968, and the lowest median sales price since March 2004. The S&P Case-Shiller Home Price national index recorded a 16.6% decline in the third quarter compared with the same period a year ago. Prices in Case-Shiller's separate index of 10 major cities fell a record 18.6%, while its 20-city index dropped a record 17.4%

Home prices are currently at great levels for home buyers, but not so great for those refinancing if they happen to live in a severely depressed region. It is always best to get a handle on your home value before refinance shopping, so that you know where you fall on the loan-to-value scale. Since refinance rates are so low, those with adequate equity in their homes can stand to receive nice savings in the current environment.

Most feel that the current low mortgage rates should hold for a while. It is a little less clear as to whether rates will drop further. There is not much room left for the bond yields to go lower, but the mortgage risk spreads should tighten on the government announcement. It is quite possible that bond yields could go up as the economy recovers, while the mortgage spread declines with lower risk. In that event, we could stay at these levels for quite some time. But hey, that’s a good thing for those refinancing, as rates are in a great spot now.


May the Mortgage Refinance Rates be with You!

Refinance Tool Box

Bad Credit Refinance

Exactly what is a “Bad Credit Refinance”?

Now this is not an official definition, but I’ll give it a go. A bad credit refinance is one in which an individual’s credit score and/or derogatory items listed on their credit report result in non-qualification for a prime conventional mortgage. In other words, you have to apply for a subprime refinance or an FHA home loan. The worst-case scenario is when the individual does not qualify for any refinance program available.

In recent years, most with bad credit would eventually refinance with a subprime lender and end up paying up to 3% and more in interest rate as opposed to the same loan scenario qualified with excellent credit. Yes there was a huge difference in refinance rates between bad credit subprime and excellent credit conventional home loans.

Those keeping up with the mortgage market, now understand that subprime lenders are pretty much a thing of the past and FHA has stepped in to fill the void. The important difference is that FHA home loans offer a distinct advantage over subprime mortgages in that they offer excellent refinance rates (comparable to excellent credit conventional interest rates) coupled with a high Loan-to-Value limit of 97% of the borrowers appraised home value.

So tell me, what is a bad credit refinance?

Again, this is not an official definition, but generally those individuals that have credit scores below a 620 FICO fall into the “bad credit” refinance scenario. In fact, those with credit scores between 620-700 and/or those financing most of the equity in their home would be advised to get an FHA home loan quote in addition to a conventional mortgage program quote to choose the best option for them.

FHA home loans are not credit score driven, but most underwriting investors will require a minimum of a 580 credit score to qualify. Also, no mortgage late payments in the previous 12 months will be allowed.

Those with credit scores below 580 will have a much more difficult time qualifying for a competitive refinance home loan. Today, it is mostly “hard money” lenders that cater to this crowd, and charge a major premium in interest rate for the privilege. An alternative to going “hard money” is to contact a reputable credit restoration company to improve your credit score within FHA range. The few hundred dollars spent on credit restoration with result in multiple thousands in principle and interest savings with a FHA refinance as opposed to a “hard money” home loan.

May the Mortgage Rates be with You!

Refinance Tool Box