Archive for the ‘Refinance’ Category

The Simplest Loan Around – Part 3

September 8, 2016

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Continuing the FHA streamline refinance theme… Here’s an example.  I’m currently talking with Confidential.  Confidential is self-employed.  Confidential’s spouse, Anonymous, recently took a new all-commission sales job. 

With a standard mortgage, the income and employment verification for Confidential and Anonymous would be very tedious at best, and they likely may not qualify.  Underwriters want to see a 24 month history of income for self-employed persons.  And they will average the 24 month income to determine the borrower’s current monthly income.  That hurts self-employed borrowers whose incomes are growing.  But those normal underwriting concerns do not apply to the FHA Streamline Refinance!

The interest rate on Confidential and Anonymous’ current mortgage is 4.75%.  That is high by today’s standards.  The good news is that they bought their home with a FHA loan several years ago.  I quoted Confidential and Anonymous a new FHA interest rate at less than 3.5%, and we expect to lower their monthly payment by over $220!  Given the closing costs for the loan, this refinance will pay for itself in less than a year.  After that, they are saving over $2,500 per year!

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I’m not worried about this loan being approved in spite of the fact that Confidential and Anonymous are self-employed and they cannot provide the standard 24 month income history.  And we don’t have to fret about an appraisal value.  They have made all FHA mortgage payments on time, and this refinance will reduce their payment by over 15%.  They qualify for what might be the easiest loan around – the FHA Streamline Refinance.

So how do you determine if a refinance is right for you?  There are many considerations, but we have a couple of rules of thumb:  (1) If you can lower your payment by $100 per month or more, and (2) if the refinance will “pay for itself”* in 36 months or less, then you may want to investigate refinancing options.  (*Divide the loan closing costs by the estimated monthly savings to calculate how many months will pass before the savings cover the entire cost of the refinance.  If this time period is 3 years or less, then refinancing may be a good option for you.)

If you want to lower your current monthly payment by taking advantage of current low, low mortgage interest rates, contact me here at Dunwoody Mortgage.  I will take the time to help you understand all of the options available to you, and I will coach you to make the best financial decision possible for you and your family.

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The Simplest Loan Around – Part 2

August 12, 2016

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In the last blog post, I introduced the FHA “streamline” refinance loan. These loans are the fastest, simplest way for FHA mortgage holders to refinance to today’s low, low rates.

The streamline program simplifies home refinancing by waiving the documentation typically required for a mortgage, including income and employment verification, credit score verification, and an appraisal of the home. Homeowners can also possibly use the program to reduce their FHA mortgage insurance premiums (MIP).  Like an Olympic swimmer reduces friction by “streamlining” when underwater, the FHA streamline refinance offers much less resistance and effort than a regular purchase loan.

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Here’s a quick summary of the benefits:

  1. No appraisal is required – FHA will use your original purchase price as your home’s current value, regardless of what the house is worth today.
  2. No employment verification is required with the streamline refinance.
  3. No income verification is required.
  4. No detailed review of your credit report is performed. If your score is 600 or higher, you qualify.

So to sum up the benefits, you can be (a) out of work, (b) without income, (c) have a low credit score, and (d) be underwater on your home mortgage and you can still qualify for an FHA streamline refinance.

Now this sounds crazy.  Why would they do this?  Well remember, to qualify, you must already own the home and have an FHA mortgage.  We are not qualifying you to take on a new mortgage payment for a new house.  The FHA is already committed to insuring your home mortgage.

Therefore, it is in the FHA’s best interest to help as many existing mortgage holders as possible lower their payments.  By lowering payments, they will lower the default rate.  So this program helps the FHA, but it also helps the borrower who can lower his monthly payment.

In the next post, we will review example scenarios where this type of loan can really help the homeowner.  But for now, if someone you know in Georgia has a FHA mortgage with an interest rate of 4.00% or higher, have them call me to discuss a potential refinance.  We’ll run the numbers together to make sure it’s a good financial move for them.

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The Simplest Loan Around – Part 1

August 4, 2016

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It’s a fun time to be a mortgage lender.  Interest rates are hovering near their historic lows.  They’ve been close to rock bottom for a while, but this Brexit situation has pushed them back to almost the lowest level in history.

Right now, for borrowers with a credit score of 680 or higher, I can quote an interest rate in a range right around 3.25% for a 30 year fixed rate FHA mortgage.  To me that is amazing.

That rate applies to both purchases and refinances.  But it gets even better for refinances….if you have an existing FHA loan that you want to refinance, we can do a “streamline” refinance that is much easier than a standard loan.

So what is this awesome FHA streamline refi program?  Here are the details:

  1. It is only for people with an FHA mortgage.  If you have a conventional mortgage, this does not apply.
  2. It is only for people who are current on their FHA mortgage.  If you are behind on your payments, you don’t qualify.
  3. It is only for people who have no more than one late payment in the last 12 months.  If you have multiple late payments recently, you don’t qualify.
  4. It can only be used if it lowers your monthly payment by 5% or more.  And by monthly payment, we are talking about principal plus interest plus mortgage insurance.  Escrow is not considered.
  5. If you have previously refinanced an FHA mortgage on your home, 210 days must have passed from the date you closed your last refinance before you are eligible.

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So that’s what it takes to qualify, what’s the big deal?  What makes this streamline program so special?

In short, these loans are the fastest, simplest way for FHA mortgage holders to refinance to today’s low, low rates.

The streamline program simplifies home refinancing by waiving the documentation typically required for a mortgage, including income and employment verification, credit score verification, and an appraisal of the home. Homeowners can also possibly use the program to reduce their FHA mortgage insurance premiums (MIP).

I’ll provide more details in my next post, but keep this in mind for now, if you or a friend / family member bought a house before January 2012 or in the second half of 2013 / early 2014, ask yourself or the other person (1) do you have an FHA mortgage and (2) have you refinanced that mortgage?

If their answers are “Yes” and “No,” tell them you know a mortgage lender who might be able to save them thousands of dollars on their home loan, and can make the process really easy.

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How to pay for home renovations

April 19, 2016

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It’s the spring, which means it is time for a home remodeling project. Here’s the big question… how am I going to pay for that new kitchen?… swimming pool?… addition to the home?… etc.

If you don’t have the money on hand, and there is equity in your home, there are two ways to go about getting money to pay for a remodeling project.

Cash Out Refinance – with interest rates as low as they are, a refinance in general could be in order. While doing the refinance, look into a cash out refinance. Depending on the amount of money being taken out, the interest rate is only slightly higher. The max loan to value right now on a cash out refinance is 80% of the value of the home. For example, let’s say the home appraises for $400,000, and the balance on the current mortgage is $220,000. Taking 80% of the $400,000 value is $320,000. When you pay off the balance of $220,000, then there is $100,000 left over to go towards the project.

You are not required to take the full 80%. Maybe the kitchen remodel is only $60,000, so only borrow $280,000 in our example. There’s no reason to do the full amount if it isn’t needed. The rate is fixed for the life of the loan if choosing a fixed rate mortgage option.

If your current rate is over 4.500%, then this could make a LOT of sense as you could take cash out AND get a lower interest rate. A complete win-win.

Home Equity Line of Credit – this is a second mortgage and a bit of a different option. Let’s say you have some money on hand and are unsure of the total cost of the project. Instead of needing a majority of the money, you may only need a little more than what is in your investment accounts. In a situation like that, then a home equity line of credit (called HELOC) may be the way to go.

Using a HELOC, interest is paid only on the amount being borrowed. You can simply open the line and have the money available, like a credit card, and use the line when needed. The total loan to value of both mortgages combined can usually go up to at least 85% of the value of the home.

A potential draw back here is the interest rate. The rate floats with Prime Rate (determined by the Federal Funding rate). Depending on the amount of the equity line, credit scores, etc., the rate is normally “Prime + 1.” With Prime Rate being 3.25% + the 1%, the HELOC rate would be roughly 4.250%. The rate can go up/down depending on what the Feds to with the Federal Funding Rate. If using a no closing cost HELOC, the rate may be more than “Prime + 1.” One other drawback is the fact most HELOCs come with a prepayment penalty.

How to choose between the two? Here are some things to consider:

  • Choose a cash out refinance if you have a firm idea of the project cost, knowing you will need all of the money (no reason to pay interest on money you take out from the refinance if it won’t be used), and if the interest rate will be about the same or better.
  • Choose a HELOC if you are unsure of the cost of the project, already have some funds available, and have a really low rate on the first mortgage and don’t want to lose that rate by doing a cash out refinance.

Trying to decide what is right for you? Ready to apply and get going? If the home is in the state of Georgia, contact me today. We can discuss the pros and cons of a cash out refinance versus a HELOC and choose the one that is best for your situation. Once this is done, hello new kitchen/bathroom/addition to the home!!

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Time to Refinance?

March 3, 2015

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In recent weeks, interest rates dropped to their lowest levels since May 2013, causing the refinance business to jump significantly.  Interest rates have climbed a bit since late January, but for some people, now is still a great time to refinance.  So how do you know if refinancing may help you?  If any of these conditions apply to you, you may want to consider refinancing:

  1. If you have a conforming loan (not FHA and not jumbo) and you can lower your rate by 0.5%.
  2. If you have a FHA loan obtained between 2010 and January, 2015 – even if you obtain a new FHA loan, FHA mortgage insurance premiums have declined significantly – this may lower your payment significantly.
  3. If you pay mortgage insurance on your home loan, you can look to refinance to a lower rate and possibly drop your insurance payment depending on how much your home has appreciated since you bought it.
  4. If you have a jumbo loan and can lower your rate by 0.25%.

To refinance you will incur closing costs.  Even if the closing costs are rolled into the loan balance you still ultimately pay those costs over time.  So you need to determine if your monthly savings is worth the closing costs you will pay.  We calculate your breakeven point in months by dividing your refinancing costs by the savings on your monthly payments.

You need to ensure that refinancing will benefit you financially.  Consider this question first…”How long do you plan to stay in this home?”  If your breakeven point is after you think you will move out of the home, it’s probably best for you not to refinance.  If your breakeven point comes before the date you think you will move, then you should consider refinancing.

Not sure if refinancing is a good option?  That’s OK.  Contact us here at Dunwoody Mortgage.  We will ask you a few questions, and then we can determine your monthly mortgage savings and calculate your breakeven point.  We can discuss your options and, if refinancing makes sense for you, we will pursue it and give you the best possible rate, competitive closing costs, and outstanding customer service.  You have nothing to lose.

Don’t miss this opportunity.  Call us now before rates go back up!!

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Last year to use HARP

January 6, 2015

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As posted on The Mortgage Blog in late 2014, interest rates are still around their lowest levels from 2014. That’s great news for home owners who are upside-down on their loans.

The Home Affordable Refinance Program, or HARP, is entering its final year (well, unless Congress extends the program again). HARP allows homeowners who are underwater to refinance into a lower rate. Combine a loan program for underwater homeowners with low rates, and it is a win for homeowners. How do you qualify for HARP?

If the home was purchased and securitized by Fannie Mae or Freddie Mac before June 1, 2009, AND the monthly mortgage payments have been paid on time for the past 12 months, you probably qualify for HARP. It doesn’t matter if you have a second mortgage or pay monthly mortgage insurance on your loan, you could still qualify for HARP.

You might be thinking… “I’m really underwater. I can’t qualify.” Just know homeowners can be way, WAY underwater. There is no limit.

Also, homeowners who did not have private mortgage insurance (known as PMI) on their loan initially can still refinance even without 20% equity in their home today. There would not be PMI on their new loan.

If you missed the historically low rates of 2012 and 2013, you may want to act quickly.  Rates are unlikely to return to those historic low levels, and they at the just about the lowest levels seen since May 2013.

To get started, contact me to talk about the pros and cons of HARP. Together, we can determine if you qualify for the HARP program.   It’s the best way to lower monthly payments when you owe more than your home is worth.  Don’t miss this opportunity!

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The refinance boom is dead, but why?

August 18, 2014

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As many in the industry know, refinances dwindled in 2014. Freddie Mac recently stated the “official” end to the refinance boom after the second quarter 2014. Freddie Mac goes on to say the purchase market has increased drastically this year, and the industry is now in its first dominated purchase market since 2008.

Realistically, Freddie Mac’s announcement is about a year behind. In early May 2013, interest rates began to rapidly climb. By the time the dust settled in mid June, rates had jumped over 1.25% from the low 3’s to the mid 4’s for a 30 year fixed rate loan. From the beginning of 2013 through the end of May 2013, refinances were over half of my business each month. Since June 2013 through August 2014, refinances only account for 20% of my business.

But why?!? Interest rates are still low. What many do not know is rates improved in 2014 and are currently lower than they were at the end of 2013. Also, some homeowners are still underwater in their homes. Don’t forget that HARP (Homes Affordable Refinance Program) still exists. Qualifying homeowners can refinance regardless of how far underwater they may be.

Rates are not as low as they have been now compared to early 2013. That doesn’t mean you should write off the possibility of refinancing altogether. If your home is in the state of Georgia, shoot me a quick email. We can talk about the pros and cons of refinancing by answering a few questions. You never know until you ask.

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HARP 3? Maybe!

July 15, 2013

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When HARP was created by the government to refinance homes that were underwater, the goal was for seven million homeowners to use the program. Due to the guidelines, HARP got off to a slow start. Roughly two years after the program began, less than one million homeowners were able to take advantage of it. This caused the government to rework the guidelines, and HARP 2 was born.

By November 2012, HARP 2 was in full swing and the pace of refinancing tripled. Even still, the total number of homeowners able to use HARP is well below the goal of seven million. To help reach the goal, HARP 3 is being proposed. To be clear, nothing has passed Congress. That means HARP 3 doesn’t yet exist, but it is gaining traction.

Here are some of the potential changes to come with HARP 3:

  1. Expand HARP to include all loans and not just those owned by Fannie Mae and Freddie Mac. This would include subprime, Alt-A, stated income/asset, and no doc loans.
  2. Eliminate the cutoff date of May 31, 2009 and allow all qualifying homeowners to use HARP.
  3. Allow homeowners to take advantage of HARP more than once. Homeowners who used HARP when it first came out got a rate in the mid to upper 4’s. As we all know, interest rates dropped into the 3’s, but homeowners who had already used HARP couldn’t take advantage of these historically low rates.
  4. Allow high balance loans to use HARP.

As I said, nothing is imminent as the proposed changes have not been approved by Congress. We at least know some of the proposed changes. Once there are concrete details on HARP 3, The Mortgage Blog will certainly let you know.

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Rise of the Interest Rates – Part 1

June 4, 2013

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Interest rates have been so low for so long, it sort of seems like science fiction whenever you hear of rates rising. Like some far off date of the pending rise of the machines to destroy earth, it never seems like it will actually arrive. Well, for interest rates, that day arrived in early May.

Correction, the rate war began on May 1st.

Correction, the rate war began on May 1st.

Interest rates rose almost 0.750% in the month of May and are now above the historic low rate levels prior to the past few years. What is the reason behind the increase. It is twofold actually. I’ll cover each of them in my next two posts.

It is no surprise that mortgage rates are rising when stocks are having record breaking days (after day, after day, after day). Rates and stocks typically work opposite of one another. Why? Rates are based off of the value of mortgage backed security bonds. As these bond prices increase, rates decrease. When stocks suffer, money comes out of stocks and goes into bonds. This increases the value of bonds, and lowers rates.

As stocks have been experiencing an all time historic run, money has come out of bonds and gone into stocks. As money comes out of bonds, it lowers their values and increases rates.

With all three indexes at or above their historic high points, more money has been pouring into stocks and helping fuel the increase in interest rates.

Where does this leave homeowners looking to refinance? If you’ve been hoping for rates to drop some more before refinancing, well, let’s just say it is going to take a while for rates to make it back down to where they were 30 days ago. Contact me today (scroll down to the bottom of the page for my info) and we can look into what a refinance will save you now with rates so much higher than they were in the spring.

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New Years Resolution – Do HARP in 2013

December 18, 2012

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The government’s Home Affordable Refinance Program, known as HARP, is slated to run through 2013. If you haven’t taken advantage of HARP yet, time is beginning to run out.

HARP began in early 2009 as a way to help homeowners underwater on their mortgage refinance into the historically low interest rates of the past couple of years. The goal was to refinance 7 million households. Since the number of homeowners qualifying to use HARP wasn’t quite hitting the target, it was revamped into HARP 2 back in late 2011. While the program was overhauled, the date for the program coming to an end wasn’t extended.

While there is talk of an extension and even a HARP 3 (to allow more homeowners to use it), for now it is all talk. To ensure you are able to use HARP, make it your new years resolution to refinance using HARP before the end of 2013.

What is HARP:

  • You must have a conventional loan that is owned by Fannie Mae or Freddie Mac
  • You needed to have got your loan prior to March 1, 2009 (for Fannie Mae’s version) or prior to June 1, 2009 (for Freddie’s version)
  • Mortgage payments must have been made on time in the last year
  • If you have a second mortgage OR pay monthly PMI on your mortgage, you most likely still qualify for HARP

Those are just the general guidelines. If you bought your home in mid 2009 or earlier, made payments on time, and have a conventional loan, it is worth checking out to see if you do qualify for HARP and can refinance into today’s historically low interest rates. If your home is in Georgia, I can help you get the ball rolling on the refinance. Contact me today to get started.

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