Texas Mortgage Corner » refinance

Want an Instant 13% Savings On Your Monthly Mortgage Payment?

Tommy — Tue, 07 Feb 2012 13:45:00 +0000

Falling mortgage rates make owning a home more affordable. Mortgage rates are directly tied to monthly mortgage payment so as mortgage rates drop, so does the cost of home-ownership.

It’s a money-saving time to buy a home in Texas — or to refinance one. Mortgage rates have never been this low in history.

According to Freddie Mac, last week, the average 30-year fixed rate mortgage fell to 3.87% nationwide for borrowers willing to pay an accompanying 0.8 discount points plus closing costs. 0.8 discount points is a one-time closing cost equal to 0.8 percent of your loan size, or $800 per $100,000 borrowed.

This represents an incredible value as compared to February of last year.

It was exactly one year ago that mortgage rates begin their long slide lower. On February 11, 2011, the 30-year fixed rate mortgage reached its peak for the year, reading 5.05% in Freddie Mac’s nationwide survey. If you are among the many U.S. households that bought or refinanced a home around that time, you could choose to replace your current home loan with a new one and save close to 13% on your monthly mortgage payment.

13 percent saved on your mortgage is a noteworthy statistic.

Look at this 30-year fixed rate mortgage payment comparison over the last 12 months :

February 2011 : $539.88 principal + interest per $100,000 borrowed
February 2012 : $469.95 principal + interest per $100,000 borrowed

Because of falling mortgage rates, a homeowner with a $250,000 30-year fixed rate mortgage would save at least $175 per month just by refinancing into a new loan at today’s mortgage rates. That’s $2,100 in savings per year.

Even after accounting for discount points and closing costs, the “break-even point” on a mortgage like that can come relatively quickly.

We can’t predict mortgage rates so there’s no promise rates will stay like this forever. If you’re planning to buy a home or refinance one, the best way to keep your monthly payments down is to lock your rate while rates are still low.

The market looks ripe for that now.

Should I Refinance My Home?

Tommy — Tue, 11 Oct 2011 12:59:07 +0000

With mortgage rates at all-time lows, you may be asking “Is now a good time to refinance?”. This short interview from NBC’s The Today Show offers good insight.

Refinancing a mortgage is about more than just “low rates”. For example, there are costs associated with giving a new mortgage and even with the average, 30-year fixed rate mortgage near 4 percent, the costs of a such a move can outweigh the benefits — both in the short- and long-term.

The video originally ran in September when mortgage rates averaged 4.09%. Rates are different today, but the offered advice remains relevant.

Some of the key points raised include :

The lowest rates come with the highest costs. Consider a slightly higher-rate option from your bank.
Falling home values may make it harder to qualify for a refinance in the future. Your best time to act may be now.
If you’re many years into a 30-year loan, you can consider switching to a 15-year mortgage to avoid “resetting” your term.

And, lastly, the interviewee makes a strong point that your refinance should save you enough money to make paying the closing costs “worth it”. Make sure the break-even point on your closing costs versus your monthly savings occurs within a reasonable time frame.

At 4 minutes, the The Today Show video is short, but dense with quality information. For follow-up on whether a refinance makes sense for your situation, be sure to talk with your loan officer.

Don’t Rush To Refinance That ARM – It May Be Adjusting To Under 3 Percent

Tommy — Wed, 10 Mar 2010 13:57:58 +0000

If your mortgage is set to adjust this year, the smart move may be to let it. Today’s conforming mortgages are adjusting lower than ever before — as low as 3 percent. It may not be what you expected when you signed for your ARM several years ago.

The reason why ARMs are adjusting lower is because of how they’re made.

When conforming adjustable-rate mortgages adjust, they adjust according to a pre-determined formula. The formula is the sum of a constant and a variable and it pretty easy. The constant is usually 2.25 percent and the variable is a daily-changing interest rate called LIBOR.

The formula looks like this:

New Mortgage Rate = LIBOR + 2.250 percent

LIBOR is an acronym for London Interbank Offered Rate. It’s an interest rate at which banks borrow money from each other. In Fall 2008, when Lehman Brothers fell and sparked a global banking fear, LIBOR spiked as the risk of inter-bank borrowing jumped.

Since then, however, LIBOR is down.

Normalcy is returning to banking and the timing couldn’t be better for Austin homeowners with ARMs. 15 months ago, a homeowner’s ARM may have adjusted to 6 1/2 percent. Today, that same ARM falls to just above 3.

As a strategy play, it might make sense to let your ARM adjust. Or, because fixed rates are still near 5 percent, converting that ARM to a long-term fixed-rate product might make sense, too. The decision is a balance between how low do you want your payment, and how long might you live in your home.

The longer you stay, the more it might make sense to switch to fixed-rate, even though ARM rates are so low.

If you’ve got an adjusting ARM, feel free to contact me about your choices. Once March ends and the Fed withdraws its mortgage market support, mortgage rates may rise and the fixed-rate option may be gone.

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Check Tommy out on Twitter @RightMtgGuy for the latest and greatest mortgage advice

Texas Mortgage Rates Going Up

Tommy — Tue, 02 Mar 2010 00:01:49 +0000

The Fed Purchase Program is ending in March and the MBS (mortgage backed securities) market will be an open canvas to new investors.

At the moment, the Fed is 92% complete with their program, and when they back out of it, this is going to attract investors that are going to require more yield. Well more yield for them means higher rates for you (and me).

Be on the lookout here in the next month or so as things progress and wind down.

Vacating a Jointly Owned Property- Quick FHA Fact

Tommy — Fri, 11 Sep 2009 12:45:12 +0000

If you are vacating a residence that will remain occupied by the co-borrower, he/she is required to obtain a NEW FHA mortgage loan.

Acceptable situations are:

1.) Instances of divorce, after which the vacating spouse will buy a new home, or
2.) One of the co-borrowers will vacate the existing property

Identity-of-Interest Transaction Down Payments

Tommy — Thu, 14 May 2009 13:56:48 +0000

An Identity-of-Interest transaction is where a sales transaction is made between parties with family/business relationships.

To break it down very simply, and this is USUALLY always the case, when a family member sells to ANOTHER family member, FHA looks at that as an Identity-of-Interest Transaction.

I get at least 1-2 calls per month with this scenario, and want to post it on my mortgage blog to educate YOU, the consumer.

So even though FHA has a minimum down payment requirement of 3.5%, in THIS case, you would have to put down 15% percent.

Here is ONE of the exceptions to this rule:

1. The family member has rented the property for at least 6 months predating the contract, in which case a rental agreement will be needed.

If you are in this type of situation and do not have the 15% to put down, feel free to contact me for more info and some other tips that may help you out!

Don’t Miss the Refi Window

Tommy — Fri, 02 Jan 2009 18:03:07 +0000

Call Us NOW to get a LOWER RATE.

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — Lured by low mortgage rates, many homeowners have been rushing to refinance. Interest is gaining for good reason: Eligible borrowers can lock in rates that haven’t been this attractive in decades.

“With interest rates hovering around 5% for conforming loan amounts, homeowners should begin to seriously consider refinancing into a new fixed-rate mortgage, especially if they currently have an adjustable-rate mortgage,” said Lisa Weaver, president of Columbia, Mo.-based Certitude Financial Group. And don’t drag your feet, either, she said.

Rates on jumbo mortgages are still high, she said, but the national average rate on a 30-year fixed-rate conforming mortgage is the lowest in at least 37 years, according to Freddie Mac. The conforming loan limit in 2009 is $417,000 for most areas of the continental U.S., although in designated high-cost markets it will be up to $625,500.

Given the volatility in the mortgage market this year, Greg Gwizdz, national retail sales manager for Wells Fargo Home Mortgage, also advises homeowners to be proactive. It’s possible that rates will be low for a while, but in this turbulent economy, it’s not best to gamble that tomorrow will bring a better deal.

“Don’t sit back and say I’m going to wait for something to happen and for rates to go even lower,” he said. If you’re able to refinance into a mortgage that will be better for your finances, don’t pass up the opportunity, Gwizdz said.

Below are other points to consider:

1. Have an idea of home’s value
Prior to starting the refinancing process, call a real-estate agent or look online at sites including Zillow.com to get an estimate of what your home could be worth, said Scott Everett, founder and president of Dallas-based Supreme Lending. If you’re “drastically upside down” on your mortgage, meaning that you owe a lot more than your home is now worth, the possibility of refinancing might end right there.

“If you owe $250,000 and the house is worth $250,000, it [refinancing] is worth discussing,” he said. But if you owe $250,000 and “the house is worth $150,000 and you’re in Southern California, then you probably won’t be able to do it,” he said. Many Southern California markets have experienced a drop in home prices.

To get a better idea on a home’s value, borrowers might ask their mortgage firm if the appraiser it works with could give a ballpark estimate before starting the process, said David Adamo, CEO of Luxury Mortgage, in Stamford, Conn. But that’s still just an estimate until an appraiser comes out to your home, he pointed out.

2. Get ready for a thorough screening process
It’s not impossible to get a mortgage in today’s environment. But lending standards are likely a lot stricter than they were the last time you applied for a mortgage, so expect a thorough and frank discussion of your finances with a mortgage banker or broker before the application is even filled out.

Lenders are asking would-be borrowers to document income and assets thoroughly. In general, many also want FICO credit scores of 660 or 680 for conventional conforming mortgages; requirements are lower for loans backed by the Federal Housing Administration, Gwizdz said.

Those who might have a particularly tough time getting a mortgage today are self-employed homeowners who don’t have two years of income documentation — even if they have the income to support the mortgage, Adamo said. The availability of stated-income mortgages, which don’t require borrowers to fully document their income, is limited, he added.

3. Know what you’ll be saving
The old rule of thumb was that your rate should drop two percentage points for a refinance to be worth it, but that doesn’t always apply anymore, Adamo said. If you can recoup closing costs of the new mortgage in the first 12 months — and can save three-quarters of a percentage point on your interest rate every year thereafter — it’s probably economically justifiable to refinance, he said.

In any case, have a conversation about what rate would make refinancing worthwhile, and be prepared to take action. Borrowers also need to consider how long they want to stay in the property to determine which mortgage makes the most sense for their situation, Weaver said.

Sometimes you could be better off refinancing even if you don’t get a better rate, Gwizdz pointed out. If you have an adjustable-rate mortgage that resets in a year, but can get a fixed-rate mortgage at the same rate, it’s probably a good idea to refinance now if you plan on being in the home for years to come, he said.

He also cautions people about refinancing into mortgage terms that extend the life of the loan; doing so may bring monthly payments down, but will probably make the loan more expensive in the long term. “However, for homeowners that must have the lowest payment possible, it may be the right choice when combined with a lower fixed-rate product,” Ms. Weaver said.

4. Don’t count on cashing out
Tapping home equity through a cash-out refinance is much more difficult these days, due to stringent credit standards and loan-to-value requirements, Weaver said.

According to Freddie Mac, the share of refinances with a cash-out component was 63% over the first three quarters of 2008, the lowest level since 2004. Cash-out refinance mortgages have loan amounts at least 5% higher than the paid-off mortgage balances.

“The combination of declining home values and tighter underwriting standards have reduced the amount of equity that can be extracted by homeowners this year,” Frank Nothaft, Freddie Mac’s chief economist said in a news release.

Amy Hoak is a MarketWatch reporter based in Chicago.

FHA Streamline Refinances

Tommy — Wed, 17 Sep 2008 17:17:50 +0000

With mortgage rates taking a tumble over the last few days, loan officers with customers who have an FHA insured mortgage have been calling frantically to get them locked in at a lower rate.

What is an FHA streamline?

FHA Streamline refinance is a program designed to give borrowers who already have an FHA insured mortgage the ability to refinance to a lower rate without the expense and hassle of a traditional refi. Typically that means no appraisal, no credit check (other then a mortgage reference to make sure they have been on time and you can be late up to 2 times in the last 30 days depending on the lender), no employment information and little or no fees.

You need to remember that FHA is an insurance policy and not a lender. When you put that into perspective you realize that it is in the best interest of the FHA program to allow for streamlines. Lower payments equal less likely to default on there obligation which in turn means less of the FHA insurance pool being used up. Its just like regular insurance, its there but no one wants to use it unless they have to!

So when rates go down- FHA streamline is the way to go to lower your monthly payments.

Interested in a Streamline? Visit www.FHALoanHouston.com today and apply!