Tuesday, October 23, 2012

Construction Improving?

Since 2006, the number of purchase money loans made via the FHA has increased 6-fold. Last year, the FHA insured 30% of all purchase money mortgages. This is because FHA mortgage rates have remained low, and the FHA offers a 3.5% downpayment program that is unequaled by Fannie Mae or Freddie Mac.
The only other low-downpayment mortgage programs are via the USDA and the VA and both have special qualification standards.
For FHA-backed homeowners, though, it's more than just the FHA low-downpayment mortgage that's a boon to household finances -- the FHA Streamline Refinance is a pretty good perk, too.

About The FHA Streamline Refinance

The FHA Streamline Refinance is a unique mortgage product, available to homeowners with existing FHA home loans. The program was built to be the fastest, simplest way for an FHA-insured homeowners to refinance their respective mortgages.
The FHA Streamline Refinance's big draw is its leniency.
For homeowners using the FHA Streamline Refinance program  -- according to the FHA rulebook --  income is not verified; employment is not verified; and, credit scores are not verified.
So long as an FHA-backed homeowners makes his mortgage on-time payments for a period of at least 12 months, a mortgage approval is all but guaranteed.
That said, not everyone gets approved for the FHA Streamline Refinance. Notably, there are 3 groups of homeowners for whom the FHA Streamline Refinance remains out of reach.
  • Those that meet the FHA Streamline Refinance guidelines as written by the FHA, but fail to meet the FHA Streamline Refinance guideline overlays required by their bank
  • Those that are approved for an FHA Streamline Refinance, but don't have the cash required to start a new escrow account for real estate taxes and homeowners insurance
  • Those that meet the FHA Streamline Refinance guidelines, but want to reduce their loan term to 15 years; or move from a non-adjusting ARM to a fixed-rate mortgage
Perhaps the FHA could take a page from the government's HARP refinance program, and work to make more homeowners eligible for its flagship FHA Streamline Program.

Force Banks To Remove FHA Streamline Refinance Overlays

The FHA Streamline Refinance is the most lenient mortgage product in the market today. There are almost no verifications required.
The FHA's stance is that -- irrespective of your credit score or your employment status -- if you're making payments on your mortgage at your current mortgage rate, you're likely to keep making payments on your mortgage if that mortgage rates were lower. This is  about as "common sense" as mortgages get.
Lenders, however, don't underwrite to the FHA's Streamline Refinance program guidelines. Instead, lenders add additional qualification standards for FHA Streamline Refinance applicants to clear. In industry parlance, these are called "investor overlays" and, for the FHA Streamline Refinance, overlays can include any of the following :
  • Verifying an applicant's current employment status and 10-year employment history
  • Verifying an applicant's income to make sure minimum debt-to-income ratios are met
  • Verifying an applicant's credit scores to make sure FICOs are 640 or higher
These overlay hurdles aren't high, necessarily, but they manage to stymie loads of otherwise-qualified FHA Streamline Refinance applicants; people that have never been late on a payment who want some payment relief; people who meet the FHA's standards but don't meet their lender's standards.
Now, the reason the banks raise standards beyond FHA requirements is because the FHA holds banks responsible when they make "bad loans". When banks make too many bad loans, the FHA fines the bank and may revokes their FHA lending license. Banks don't want any part of that risk.
If the FHA would absolve lenders of certain risks associated with underwriting FHA Streamline Refinances, many more Americans would be streamline-eligible. Until then, the FHA Streamline Refinance will be a limited-access program.

Allow Homeowners To Finance Tax And Insurance Escrows

Another hurdle for refinancing households is that the FHA Streamline Refinance guidelines place tight reins on a borrower's loan size. Based on the FHA's rules, a homeowner's post-FHA Streamline Refinance mortgage balance may not exceed its current mortgage balance, except for the cost of FHA upfront mortgage insurance.
With an FHA Streamline Refinance, all mortgage closing costs and all prepaid items (e.g.; prepaid interest, tax escrow), therefore, must be paid in cash at the time of closing. They may not be added to the loan size.
This helps to explain why zero-closing cost FHA Streamline Refinances are so common.
With a zero-closing cost FHA Streamline Refinance, the mortgage lender pays all loan closing costs on behalf of the homeowner, which reduces the amount of cash that the homeowner needs to bring to closing. The credit can't always cover tax and insurance escrows, though, and in states with high real estate taxes, depending on the time of year, prepaid items can run $9,000 or more.
Not many homeowners have that type of cash on-hand. And, because the FHA won't let them add it to the loan amount, they find themselves unable to refinance.
If the FHA changed its FHA Streamline Refinance guidelines to allow "adding escrows to the loan balance", more FHA-backed homeowners would be eligible to use the FHA Streamline Refinance program.

Waive Certain Net Tangible Benefit Requirements

The FHA Streamline Refinance is designed to help FHA-backed homeowners save money, but the FHA wants to protect against frivolous refinancing. As such, one of the FHA Streamline Refinance requirements is that homeowners must realize a benefit via the refinance.
In general, the FHA wants every refinancing homeowner save at least 5% on their monthly mortgage payment.
The FHA calls this 5% savings requirement a "Net Tangible Benefit". The 5% is calculated by adding your current (principal + interest) to your current monthly mortgage insurance payment and then comparing that figure to the same three inputs on your new mortgage.
If the new mortgage payment isn't at least 5% less than the current one, there's no refinance allowed.
A modest mortgage rate reduction is often enough to meet the FHA's 5% savings requirement. However, because of the Net Tangible Benefit mandate, it's virtually impossible for homeowners to refinance from a 30-year fixed rate mortgage into a 15-year one; or for homeowners to refinance from a non-adjusting ARM into a fixed rate loan.
Homeowners can't FHA Streamline Refinance into a 15-year fixed rate mortgage because 15-year mortgage payments are higher than for comparable 30-year loan terms. Even though the mortgage rates are lower and the homeowner stands to benefit in the long-term, the FHA won't allow the refinance -- not if the mortgage payments increase, anyway.
Similarly, the FHA won't let homeowners with ARMs use the FHA Streamline Refinance to swap into a fixed-rate mortgage without meeting the 5% savings requirement. Some people would argue that refinancing from an ARM to a fixed rate mortgage is a "tangible benefit" and, as it turns out, the FHA agrees -- but only if that ARM is in its adjusting phase.
For homeowners with ARMs in their initial teaser phase, refinancing is near impossible.
If the FHA reclassified its Net Tangible Benefit to include "Reduce Loan Term" and "Convert To A Fixed Rate Mortgage", more FHA-insured homeowners would be eligible for, and would use, the FHA Streamline Refinance Program.

Monday, October 22, 2012

Mortgage Rate Spread Increasing?

Per a new research report from CoreLogic, the spread between mortgage rates on existing loans and current mortgage rates is the highest it has been in a decade.
Thanks to recent, heavy declines in mortgage rates, the spread is now greater than 1%, and appears to be rising.
Compare that to numbers seen in much of 2006 through 2008, when the spread was in negative territory, meaning it was better to hold on to your existing rate as opposed to refinancing to the market rate at the time.

However, refinancing activity is still very tame, and CoreLogic even refers to it as “very low given current mortgage rates.”
The company investigated the numbers back in July, and found that about a third of borrowers were “in the money,” meaning it made financial sense to refinance, and that they were eligible to refinance based on today’s requirements.
Despite this, roughly 4.5% of all outstanding mortgages, or about 2.4 million borrowers have not refinanced for one reason or another.
Of course, half of these borrowers are in negative equity positions, with the median loan-to-value 100%. So they might not realize they’re eligible.
Still, with programs like HARP 2.0 in full swing, many of these borrowers should still be able to refinance.
And we’re not talking about saving a few bucks. The average interest rate in this group was 5.96%, 259 basis points above the going rate of 3.37% for a 30-year fixed, per the latest Freddie Mac data.
That would save the average homeowner about $350 a month, or an annualized $10 billion collectively. Imagine that kind of stimulus for the economy…

Why Aren’t Borrowers Refinancing

It’s a bit of a catch-22. Mortgage rates have dropped so much so fast that it has made a lot of borrowers appear as if they’ve got sky-high rates on their mortgages.
In reality, their rates aren’t that high historically, they just look expensive relative to the ridiculously low rates on offer today.
Adding to this is the perceived inability to refinance, for a variety of reasons, most likely more stringent underwriting guidelines and a lack of home equity.
If you read the news every day and hear that borrowers are getting shut out of the refinance market, or that it’s taking months to get a loan, the discouragement alone could kill the deal.
Sadly, this means all those efforts to lower rates through the likes of QE3 and other measures might be somewhat wasted.
But you can’t force someone to refinance. And we don’t really know all the small details of the people who aren’t taking advantage.
Perhaps they’re already making plans to move, to stop paying the mortgage, to sell when prices rise get just a little bit higher. Who knows? Data isn’t that intimate.
Lastly, CoreLogic noted that an additional one million borrowers would be eligible for a refinance if the HARP date requirement were waived.
Currently, borrowers are deemed ineligible for the program if Fannie Mae and Freddie Mac acquired their mortgages after May 31, 2009.
If this rule were dropped, borrowers with an average mortgage rate of 5.22% would be able to reduce their monthly mortgage payment by about $333.
That would add another $4 billion in annualized savings.
CoreLogic has recommended lifting this requirement and improving outreach to borrowers who are eligible to refinance.
Still, one has to wonder if offering to include homeowners in a program created before they took out their loan creates some kind of moral hazard. You can’t keep extending dates endlessly.

Fha vs A Conforming Mortgage

Which is better? An FHA mortgage or a conforming one?
With just a few basic facts -- today's mortgage rates, current mortgage insurance premium schedules, your expected downpayment percentage, and your credit score -- you can more easily choose between an FHA mortgage and a conforming one.

FHA And Conforming Mortgages : Key Differences

First, we'll want to understand how the two products are different.
The two most popular 30-year fixed rate mortgages today are the conforming 30-year fixed rate mortgage as offered by Fannie Mae and Freddie Mac; and the FHA 30-year fixed rate mortgage as insured by the Federal Housing Authority.
Each has its pros and cons.

FHA vs Conforming : Downpayments

Among the FHA's biggest appeal to first-time home buyers and repeat ones is that it requires a downpayment of just 3.5 percent. No matter what your property type -- single-family, condominium, 2-4 unit, or something else -- the FHA holds firm at 3.5 percent.
By contrast, a conforming mortgage has varying downpayment requirements.
For example, Fannie Mae and Freddie Mac will allow a 5% downpayment on a single-family home, but to purchase a 2-unit property, that minimum moves to 15 percent, and is for fixed rate mortgages only. Move to 3-4 units, and the downpayment increases to 25%.
For homeowners planning to make a low downpayment, the FHA may offer a more suitable product.

FHA vs Conforming : Mortgage Insurance Premiums

FHA and conforming mortgages also differ in how they use mortgage insurance.
The FHA charges two types of mortgage insurance -- an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP).
For FHA purchase loans, UFMIP is 1.75% of the borrowed amount, or $1,750 per $100,000 borrowed; and annual MIP on a 30-year fixed rate mortgage varies -- 1.20% for a loan with five percent down; 1.25% for a loan with less than five percent down; and, an extra 0.25% for loans exceeding $625,500.
By contrast, Fannie Mae and Freddie Mac charge zero upfront mortgage insurance and annual private mortgage insurance (PMI) rates are often lower than for comparable FHA home loans.
A second mortgage insurance difference is that the FHA requires annual MIP for all 30-year fixed rate mortgages, regardless of loan-to-value (LTV). Fannie Mae and Freddie Mac require PMI only for loans for which the LTVs exceeds 80%.
And, lastly, with a 30-year fixed rate mortgage, the FHA requires MIP to be paid until two conditions are satisfied : (1) The homeowner must have LTV of 78% or less, based on the current loan size and the original purchase price; and (2) MIP must have been paid for 5 years.
With a conforming mortgage, PMI must only be paid until the home's LTV is 80%.

FHA vs Conforming : Mortgage Rate Adjustments

Another key difference is in the use of risk-based pricing. The FHA takes mortgage borrowers on a Pass/Fail system. Fannie Mae and Freddie Mac do not.
For example, if you're approved for an FHA mortgage, the mortgage rate you get is the day's "market rate". If you're approved for a conforming mortgage, however, you may not get the lowest daily rate.
This is especially true if any of the following conditions are true : (1) Your credit score is not 740 or better; (2) Your loan-to-value exceeds 80%; and (3) Your loan balance exceeds $417,000; (4) You're buying a multi-unit home or a condominium.
These factors can raise your mortgage rates by as much as 0.75%. Combine two or three on the list, and your rate can rise by 1 percent or more.

FHA vs Conforming : Mortgage Rates

Mortgage rates for FHA mortgage are based on Ginnie Mae (GNMA) mortgage bonds. By contrast, conforming mortgage rates are based on mortgage bonds backed by Fannie Mae and Freddie Mac.
These are separate products with separate prices.
On some days, FHA mortgage rates are lower than conforming mortgage rates. On other days, FHA mortgage rates are higher than conforming mortgage rates. Currently, mortgage applicants that pay discount points and closing costs will find conforming mortgage rates to be slightly lower than FHA ones.
Applicants opting for no points will get lower rates via the FHA.

FHA Mortgage Vs Conforming Mortgage : A Cheat Sheet

With so much difference between the FHA and conforming 30-year fixed rate mortgage, there's no set playbook for choosing the best mortgage. The math will depend on your particular purchase and planned budget.
For example, if you need to make as small of a downpayment as possible, you'll want to choose the FHA. It's 3.5% downpayment program is bested only by the VA's 100% mortgage program for military borrowers, and the USDA's no money down mortgage for suburban and rural homes.
However, as a starting point for comparisons between FHA and conforming mortgages :
  • Downpayment of 4.99% or less : Apply for an FHA mortgage
  • Downpayment  of 5.00-19.99% : Ask your loan officer for a recommendation
  • Downpayment of 20% or more : Apply for a conforming mortgage
These guides have exceptions, of course. A 15-year fixed rate mortgage carries different considerations, for example, as does a home bought "at a steal".
Talk with your loan officer about choosing your optimal route.

Should You Use An FHA Mortgage Or Conforming One?

For today's home buyer, low FHA mortgage rates may be enticing, but there's more to consider than just the rate. Closing costs matter and so does mortgage insurance as well as add-on fees including upfront MIP and risk-based pricing.
Consider your short- and long-term goals for the home and pick your most suitable loan.

Friday, October 19, 2012

U.S. foreclosures down?

U.S. foreclosures are becoming more scarce.
September's foreclosure filings were down 7% as compared the month prior, and down 16% from September 2011.
Several states dominate the foreclosure landscape.
For today's home buyers looking for a bargain, these five states may prove your best opportunity..

Foreclosures Return To 2007 / Pre-Recession Levels

In September 2012, there were just 180,427 U.S. foreclosure filings, where "foreclosure filing" is one of the following three foreclosure-related events : (1) The issuance of a default notice on a home; (2) A scheduled home auction by a bank; or, (3) A bank repossession of a home.
There were just 180,427 foreclosure filings last month -- the lowest total since July 2007. However, not all foreclosure filings result in "homes for sale". Some are remedied between the bank and the borrower, and some are sold at auction.
Other times, banks will buy a home back at auction, then list it for sale via the local MLS or some other means. This is called a bank repossession, or bank repo, and it's the inventory today's home buyers and real estate investors watch most closely.
It's with bank-owned real estate that the "great deals" are found, with homes selling at discounts of up to 20 percent of comparable market price. Those deals are increasingly concentrated in just a few states nationwide.
In September, nearly 50% of U.S. bank repossessions occurred in just 5 states -- California, Florida, Michigan, Illinois and Arizona. The next five states -- Georgia, Ohio, Texas, Colorado and Tennessee -- accounted for just 20% of bank repossessions, by comparison.
Like all else in real estate, it seems, foreclosures are a local phenomenon.

Buy Foreclosed Properties With Little Or No Money Down

Homes in foreclosure show obvious allure to first-time home buyers and experienced ones alike. Foreclosures and other distressed properties are typically sold at deep discounts as compared to comparable, non-distressed homes and that can make material impact on your household budget.
Assuming a 20% discount on a $400,000 purchase price and a 3.5 percent downpayment via the FHA's mortgage program, look at how the monthly mortgage payment for a foreclosed home compares to the payment for a non-foreclosed one.
  • Foreclosed Home : $1,344 payment for a $320,000 home
  • Non-Foreclosed Home : $1,680 payment for a $400,000 home
That's 20 percent off the house, and 20 percent off the payment, too -- a huge difference to your household budget.
However, when buying foreclosure, it's important that you look past the home's list price. Like everything in life, getting the lowest price doesn't always mean you're getting the best deal. For example, foreclosed homes are often sold "as-is" which means that they may come with defects and damage and, in some cases, may be uninhabitable.
Homes in disrepair typically can't get financed. For those that can, however, there are various low- and no-downpayment options available including the aforementioned FHA's 3.5% downpayment mortgage; as well as the 100% VA loan program for military borrowers, and the 100% USDA loan program for those within thinly-populated census tracts.

Mortgage Rates For Foreclosure Purchases

For buyers of foreclosures -- first-timer, move-up buyer, or an investor with more than 4 properties financed -- mortgage rates remain low. Since the start of 2012, rates have trolled south of 4 percent and are expected to stay that way through the New Year.
Low mortgage rates allow for high home affordability. To see how today's rates fit your household, get started with a rate quote.

Thursday, October 18, 2012

VA rates dropping?

Low VA mortgage rates and common-sense underwriting have helped boost VA lending to an 18-year high. For today's military borrower, for purchase and for refinance, the VA loan is often the most sound, more cost-effective mortgage program available.

What is a VA Loan?

The VA loan is a mortgage program for veterans of the U.S. military. Structurally, a VA loan resembles most other loan type -- as a homeowner, you borrow some amount from the bank, then make monthly payments until the borrowed amount is paid-in-full.
However, the VA loan bears distinct advantages over its conventional and FHA mortgage cousins.
The first advantage of VA loans is that they require no money down on a purchase. Home buyers using a VA loan can finance up to 100% of a home's purchase price so long as the loan size is within the VA loan limits for the given area.
VA loan limits are typically $417,000 but may range up to $729,750 in "high-cost" areas such as northern Virginia and Potomac, Maryland.
A second advantage of VA loans is that monthly mortgage insurance is never required. No matter how large or small your downpayment, you do not pay monthly mortgage insurance with a VA loan. This is in stark contrast to the FHA, for example, which has raised its mortgage insurance requirements four times in four years.
The VA offers a better long-term "deal" to its homeowners as compared to the FHA.
And, lastly, the VA's loan approval process is among the most flexible of today's common loan types. Underwriters are given discretion to approve VA home loans which may otherwise fall outside of traditional mortgage guidelines.
To be granted VA loan entitlement, veterans must have served at least 181 days during peacetime; 90 days during war time; or, 6 years in the Reserves or National Guard. Spouses of service members killed in the line of duty are often VA-eligible, too.

VA Loans : Lower Downpayments, Simpler Underwriting

As compared to last year, VA loan volume rose 51%, according to data from the Department of Veterans Affairs. The popular Interest Rate Reduction Refinance Loan (IRRRL) program was the most common VA loan program -- proof of the veritable VA Refi Boom.
The IRRRL mortgage is the VA's version of the "streamline refinance". In general, no credit verification is required; no home appraisal is required; and, no underwriting is required.
With few exceptions, the main qualification standard of the VA IRRRL is that the new mortgage rate must be lower than the current one. In today's low mortgage rate environment, lowering your VA mortgage rate has been a breeze.
VA mortgage rates have been below 4 percent for most of 2012.
To get a sense of how mortgage rates are influencing VA refinances nationwide, consider that more than a dozen states saw VA loan volume increase by at least 60 percent in the most recent fiscal year -- and they weren't all military-heavyweight states, either.
  • Utah : 98% increase in VA loan volume
  • Hawaii : 89% increase in VA loan volume
  • Rhode Island : 76% increase in VA loan volume
  • New Hampshire : 73% increase in VA loan volume
  • Delaware : 70% increase in VA loan volume
  • Virginia : 69% increase in VA loan volume
  • Nebraska : 67% increase in VA loan volume
  • California : 65% increase in VA loan volume
  • Massachusetts : 65% increase in VA loan volume
The VA guaranteed nearly 358,000 home loans in the most recent fiscal year, totaling $75 Billion in VA lending. VA loan volume is at its highest point since 1994.

Get Approved For A VA Mortgage

For today's veteran and active military members, the VA Streamline Refinance program remains a simple way to refinance. And, for buyers, the VA loan program is absolutely worth a look. VA loans permit 100% financing and monthly mortgage insurance is never required.
With mortgage rates low and underwriting loose, gaining a VA approval has never been more simple. Get started with a rate quote.

Higher Harp Loans starting to close?

Earlier this year, the HARP 2.0 refinance program opened up to homeowners whose mortgages are "severely underwater". HARP loans for ultra-high LTVs -- loan-to-value ratios in exceed of 125% --  now account for more than one-quarter of all HARP refinances completed nationwide.

HARP : Refinancing For Underwater Homeowners

HARP is an acronym. It stands for Home Affordable Refinance Program. Sometimes called the Obama Refi, it was created in 2009 as part of that year's economic stimulus program.
At the time, mortgage rates had been dropping sharply -- but home values had been, too. In places like Los Angeles, California; Miami, Florida; and Phoenix, Arizona, homeowners were watching 30-year fixed rate mortgage rates fall into the 4s but there was, literally, nothing they could do to take advantage.
There were no mortgage programs for homeowners with no home equity.
So, the government promoted the idea that if these homeowners could just get access to refinance; to lower their monthly mortgage payments,it would increase the national household cashflow, which would increase consumer spending, which would help to push the U.S. economy forward.
HARP was launched to meet this goal.
The HARP program told banks to treat home equity differently. It instructed them to ignore a homeowner's home equity percentage so long as that homeowner had a loan-to-value (LTV) of 125% or less, and history of on-time mortgage payment.

HARP 2 : Removing 125% LTV Restrictions

When HARP was first launched, it was expected to reach 7 million U.S. homeowners. After two years, however, government data showed that the program had reached not even one million households.
There were two main reasons why, it was determined.
First, the government was asking banks to underwrite more HARP loans, but also holding them responsible for due diligence errors made on the originally-underwritten home loan.
For example, if Wells Fargo was giving a HARP loan to an existing Bank of America customer, Wells Fargo would be accountable to Bank of America's original home loan approval, and any traces of fraud.
Banks don't like rules like that. In response, many chose to limit HARP access to their existing customers base -- "same-servicer" only.
Second, as it turned out, capped HARP's LTV at 125% proved to be limiting. Homeowners in hard-hit states such as Nevada and Florida found themselves in a much more negative position than just 125% LTV. Some carried LTVs as high as 300 percent.
So, in November 2011, to make HARP "better", the government re-released HARP as HARP 2.0, where the main changes were to (1) Indemnify lenders for much of a loan's due diligence and, (2) Remove the loan-to-value restrictions of the original Home Affordable Refinance Program.
Via HARP 2.0, today's homeowners can get unlimited LTV on their home loan, and can use any HARP-participating lender. With the changes, HARP is making progress toward its 7 million U.S. household goal.

HARP For LTVs Over 125% Gain Market Share

Fannie Mae and Freddie Mac launched HARP 2.0 in November 2011 but the program was not widely-adopted until March 2012. Since then, HARP loans for which the LTV exceeds 125% have gained market share.
The month-by-month tally :
  • March 2012 : 3.6% of all HARP refinances were for LTVs over 125%
  • April 2012 : 7.5% of all HARP refinances were for LTVs over 125%
  • May 2012 : 4.4% of all HARP refinances were for LTVs over 125%
  • June 2012 : 42.8% of all HARP refinances were for LTVs over 125%
  • July 2012 : 27.7% of all HARP refinances were for LTVs over 125%
  • August 2012 : 27.3% of all HARP refinances were for LTVs over 125%
Note the spike in June's HARP tally.  This is because HARP refinances can take up to 90 days to process at the nation's largest banks. Loan applications made when HARP 2 went "live" in March likely closed in June 2012.
HARP volume for loans over 125 percent remains strong today.

Get HARP Mortgage Rates

The HARP mortgage program is slated to terminate at the end of next year. There's no rush to refinance. However, with mortgage rates near all-time lows, today's market conditions are extremely favorable for ultra-high LTV homeowners.
If your mortgage is underwater and you want to know how HARP can help, get started with a rate quote.

Thursday, October 11, 2012

Rates are racing?

For the first time in 7 weeks, mortgage rates are rising.
According to Freddie Mac's weekly mortgage rate survey, the average 30-year fixed rate mortgage rose to 3.39% nationwide, and the average 15-year fixed rate mortgage rate rose to 2.70%. The 30-year rate is available to borrowers willing to pay 0.7 discount points at closing plus a full set of closing costs. The 15-year fixed requires just 0.6 discount points.
Zero-point and zero-closing cost mortgage rates are slightly higher than the Freddie Mac average.

7-Week Mortgage Rate Winning Streak Broken

The mortgage market is a streaky one; subject to momentum. Over long periods of time, mortgage rates tend to rise and fall in long arcs. Those arcs, though, when chunked into months or even weeks can appear a bit more choppy.
Rates can't fall every week, after all, and this week proves it.
For the first time since late-August, and for just the 11th time this year, mortgage rates have increased on a week-over-week basis. The conforming 30-year fixed rate mortgage and the 15-year fixed rate mortgage rate climbed 3 and 1 basis points, respectively.
The bump in rates breaks a 7-week mortgage rate winning streak, tied for second-longest streak of the year :
  • Dec 29 - Jan 19, 2012 : 4-week mortgage rate winning streak, from 3.95% to 3.88%
  • Apr 19 - Jun 7, 2012 : 8-week mortgage rate winning streak, from 3.90% to 3.67%
  • Jun 14 - Jul 26, 2012 : 7-week mortgage rate winning streak, from 3.71% to 3.49%
  • Aug 30 - Oct 4, 2012 : 7-week mortgage rate winning streak, from 3.66% to 3.36%
The longest "losing" streak this year occurred between July 26 and August 30, a run halted by the Federal Reserve's Labor Day meeting in Jackson Hole, Wyoming at which Fed Chairman Ben Bernanke hinted that new economic stimulus was forthcoming.
Two weeks later, the Fed launched its third round of qualitative easing (QE3). Mortgage rates have been in decline since.

FHA And VA Mortgage Rates Stay Improved

The weekly Freddie Mac survey tracks short- and long-term trends within the world of conforming mortgage rate. By definition, the Freddie Mac survey ignores how mortgage rates for FHA mortgages and VA loans perform. This is because FHA and VA home loans aren't tied to Freddie Mac-backed mortgage bonds.
Both FHA mortgage rates and VA mortgage rates are "made" based on the price of a Ginnie Mae mortgage bond and, lately, Ginnie Mae mortgage bonds have performed well.
For as far as conforming mortgage rates have dropped, FHA and VA mortgage rates have dropped more. Since the start of September, Ginnie Mae bond pricing has outperformed Fannie Mae bond pricing by 50% and today's FHA and VA mortgage rate shoppers have noticed.
Both rates are at all-time lows, spurring a rush of refinance applications.
The FHA Streamline Refinance is in high-demand and underwriters are challenged to keep up with VA Streamline Refinance / IRRRL application volume.

Get A Real-Time Mortgage Quote

Mortgage rates remain low and home affordability remains high. If you've been watching mortgage rates fall and wondering when to refinance, now is as good of a time as any. Mortgage rates may resume falling next week, or they may not.
The last time mortgage rates rose to stop a winning streak, they climbed for 4 straight weeks thereafter.

Tuesday, October 9, 2012

FHA Mortgage rates are low low low?

As FHA mortgage rates fall nationwide, so does the relative cost of owning a home. As compared to just 4 years ago, FHA purchasing power is higher by 26%.

FHA Mortgage Rates : Approaching 3.00 Percent

The Federal Housing Administration is a government agency, created in 1934. It serves three purposes : (1) To improve housing standards, (2) To stabilize the mortgage market, and (3) To insure mortgage loans.
Note that the FHA doesn't make loans directly. For example, it doesn't lend money to home buyers or give money for a refinance. Rather, the FHA insures the loans that mortgage lenders make, so long as those loans meet the FHA's mortgage guidelines.
FHA purchase mortgage guidelines are similar to conventional mortgage guidelines :
  • Annual income is verified with W-2 statements and tax returns
  • Monthly debts are verified via a credit report and personal statements
  • Employment and assets are verified prior to closing
However, the FHA tends to be more "loose" with respect to who gets approved. The FHA will often insure the "common sense" loans that Fannie Mae or Freddie Mac turn down as a matter of policy, and it does so without charging high mortgage rates.
FHA mortgage rates have been under 4 percent since January.

FHA Mortgages : 16% Of All Home Purchases

FHA home loans are used in nearly 16% of home sales nationwide -- four times the frequency of just 5 years ago.  There are three reasons for this FHA mortgage explosion.
First, the FHA offers the same low rates to all home buyers. Whereas conventional loans via Fannie Mae and Freddie Mac raise the mortgage rate for a buyer whose credit score is below 740, or whose subject property is a 2-unit, 3-unit or 4-unit home, the FHA does not. All FHA mortgage applicants get access to the same mortgage rates.
Second, the FHA caters to buyers who don't want to make a 20 percent downpayment.
In its guidelines, the FHA says that home buyers must only make a 3.5% downpayment, and that 3.5% amount may be a gift from a family member, employer, labor union, or a close friend with a defined and documented relationship with the buyer. The low-downpayment option offered via the FHA plus its loose rules around gifting have helped first-time buyers and existing homeowners short of liquid cash.
Lastly, the FHA offers higher loan limits than Fannie Mae and Freddie Mac in certain high-cost areas nationwide. For example, buyers in Orange County, California; Alexandria, Virginia; and Brooklyn, New York can use an FHA-backed loan to borrow up to $729,750 and still be within local mortgage loan limits.
Via Fannie Mae and Freddie Mac, the loan limit is $625,500.

See Today's Low FHA Mortgage Rates

Like with all mortgage types, FHA mortgage rates are making all-time lows this year. The combination of a recovering U.S. economy and ongoing government stimulus have helped to keep FHA mortgage rates down. Low rates can't be permanent, however.
If you've been shopping for mortgage rates, see what an FHA-backed mortgage can do for your budget. Rates are often lower than for a comparable conventional loan and downpayment requirements are lower, too.

Good news in Housing?

Americans responding to the Fannie Mae's September edition of its National Housing Survey displayed greater optimism about the housing market, homeownership, and the country's economy in general.  Fannie Mae said that there has been a gradual improvement in attitudes about housing over the last few months but consumer attitudes about the economy as a whole improved substantially in the most recent survey, "breaking the progression of waning confidence seen during much of this year."
 "Consumers are showing increasing faith in the nascent housing recovery," said Doug Duncan, senior vice president and chief economist of Fannie Mae. "Home price change expectations have remained positive for 11 straight months, and the share expecting home price declines has stabilized at a survey low of only 11 percent. Furthermore, the Federal Reserve's latest round of quantitative easing has caused a large drop in mortgage. Friday's September jobs report, including the strong upward revisions for prior months, a sizable increase in earnings, and a sharp decline in the unemployment rate, should provide further impetus for improving consumer confidence in the housing market."
Fannie Mae's survey polls 1,000 individuals by phone each month.  The survey includes homeowners with and without a mortgage on their homes and renters.  Respondents are asked more than 100 questions which are used to track attitudinal shifts.  The survey has been conducted since June 2010,
The percentage of respondents who expect home prices to rise over the next year is now at 37 percent, up from 18 percent one year ago and the highest level in the survey's short history.  Only 11 percent think prices will experience further declines.  The average increase expected by respondents is 1.5 percent, down slightly from each of the previous two months but the 11th straight month that price change expectations have been in positive territory.

Tuesday, October 2, 2012

Purchase power increasing?

With mortgage rates low, today's home buyers benefit from record-high purchasing power. Never in history has a mortgage dollar gone this far.
If you haven't checked your housing budget lately, it's time to take a look.

Maximum Purchase Price : From $370,000 to $450,000

After two years of near-steady decline, mortgage rates are at an all-time low. In February 2011, conforming 30-year fixed rate mortgage rates topped 5 percent. Today, they're below three-point-five.
The drop in rates has boosted home affordability to record-levels. For buyers using a set monthly budget, today's low mortgage rates have increased the maximum possible home purchase price by 22 percent.
Consider this real-life example :
  • In February 2011, a $2,000 mortgage payment afforded a $370,000 mortgage
  • In October 2012, a $2,000 mortgage payment affords a $450,000 mortgage
The math works at all-price points, too. At no matter what level you set your maximum principal + interest payment,  your purchasing power is 22% higher in 2012 as compared to 2011.
The math helps to explain why renting has become more expensive than buying a comparable home across much of the United States. With vacancies low, rents are rising. And so are home prices. However, the rates at which homes are financing have plunged.

Saving For A Low Downpayment Mortgage

For today's home buyers, being able to purchase 22% more home means having to make a 22% larger downpayment, too.  On the example used above, assuming a 20 percent downpayment, buying a $450,000 home requires a home buyer to bring an additional sixteen-thousand dollars to closing.
That's a big increase.

FHA Mortgages : 3.5% Downpayment

Thankfully for today's home buyers, low downpayment mortgages remain plentiful and available, the most popular of which is the FHA mortgage.
Among the characteristics of an FHA-backed mortgage :
  • Downpayments may be as small as 3.5%
  • Downpayment may be from a donor; a "gift" of cash, with no repayment allowed
  • Loan sizes may range up to $729,750, depending on your local FHA loan limit
FHA mortgages also waive most "low FICO" penalties more common with conforming loans.
For credit scores between of 640 and up, quoted FHA mortgage rates are often the same. Comparable conforming loans charge higher rates and/or fees for FICOs below740.

VA Mortgage and USDA Mortgage : 0% Downpayment

The rise in purchasing power also benefits home buyers using a VA purchase or USDA mortgage -- both of which allow for 100% financing. Regardless of your purchase price, a zero downpayment is allowed.
VA guaranteed loans are available to U.S. military borrowers; active or discharged. VA mortgage rates are typically low as compared to conforming rates, but the major VA home loan benefit is that no mortgage insurance is required.
As a result, VA loans -- regardless of mortgage rate -- tend to feature a lower monthly payments as compared to comparable Fannie Mae or Freddie Mac loans; or, FHA loans.
Not paying mortgage insurance makes a big impact on home affordability.
The other 100% mortgage -- the USDA home loan --does require mortgage insurance but it's mortgage rates are often the lowest of all mortgage rates available. USDA loans are typically available in suburban and rural areas in which the median household income does not exceed the local average.

See Your Home Buyer Purchasing Power

For today's home buyers, with mortgage rates low, purchase power is high. Rates are falling faster than home prices are rising. The imbalance is driving first-time buyers into the market, and boosting "move-up power" for existing homeowners nationwide.
See how today's low mortgage rates can help your next purchase.

Monday, October 1, 2012

How to take advantage of when to lock.


How To Reduce Your Loan Fees

When it comes to shopping for mortgage rates, to paraphrase Doris Day, que sera, sera; whatever will be with mortgage rates will be.
Rates are a function of Wall Street. They're beyond our control. However, there are ways to make sure you're getting the lowest rate possible.
There are 4 of them, in fact.
  1. Get a higher credit score
  2. Make a larger downpayment
  3. Get higher credit score and make a larger downpayment
Or, you can follow Path #4 -- pick a smarter closing date.


Mortgage Rate Locks: A Bank's Gamble

Let's talk about Rate Lock Commitments.
A Rate Lock Commitment is a bank's promise to honor a specific mortgage rate for a specific period of time.  It's a contract, of sorts, in which the lender says: "Provided you close on your loan in the next however-many days, we guarantee your locked mortgage  rate for you.
From a bank's perspective, rate locks are a gamble.
This is because the bank is promising you an interest rate today that won't be delivered for some number of days. The more days there are between the lock date and the delivery date, the greater the chance that the bank "guessed wrong".
For a sports analogy, it's like picking trying to pick a division winner at the start of the season. There's a lot of time between Opening Day and the Day 1 of the playoffs, and a lot of things can go wrong or change.
The longer the season, the less accurate the predictions.
With respect to mortgages, it's why longer rate lock commitments often require with higher interest rates, higher fees, or both. Guessing where mortgage rates will be in the future is a dangerous game so banks hedge against "time risk". And they often pass those costs to you.

How The Rate Lock Game Is Played

The Rate Lock Game is pretty simple. It starts with the basic concept that rate locks are made in 15-day increments. You can choose from any of the following: 15-day rate lock; 30-day rate lock; 45-day rate lock; 60-day rate lock; et cetera.
Using that concept of "time risk" again, the longer your rate lock is, the higher your mortgage rate will be.
  • 15-day rate lock : 1/8 percent lower than the 30-day rate lock
  • 30-day rate lock : The basis for all other pricing
  • 45-day rate lock : 1/8 percent higher than the 30-day rate lock
  • 60-day rate lock : 1/4 percent higher than the 30-day rate lock
In a Real World Example, if you went to contract this week and set your closing date for Friday, November 16, that would be 46 days from now. You would need a 60-day rate lock and your mortgage rate would be raised 1/8 percent.
However, if you just moved your closing date one day sooner -- to Thursday, November 15 -- you'd get a 45-day lock and a lower mortgage rate. This one-day change will drop $15 off your monthly mortgage payment on a $200,000 home loan.

Be Smart About Your Closing Date

When you choose a better closing date, you keep your mortgage rates down. So, before you write that contract, consider how "time risk" will change your mortgage bottom line.
The less time you'll need to close, the more money you should expect to save.