Posts Tagged ‘low rates’

Delayed Financing

February 24, 2015

blog-author-clayjeffreys3

Let’s say you found a great deal on a home, but there is a problem. The home isn’t inhabitable… the plumbing was stolen out of the home, so there is no running water… there is major roof damage that needs to be repaired, and the current owner can’t/won’t do anything about it… the home was a foreclosure that now has broken windows, smashed doors, missing light fixtures, etc. In any of these scenarios, a bank would not lend money on the home until the home was repaired and could pass an appraisal inspection.

You are fortunate enough to be able to buy the home in cash, but don’t want to part with the money when the home could be financed at historically low interest rates. Sure, you could buy the home in cash. Then do a cash out refinance after owning the home for six months, but the money is gone for six months. Until now…

With a Delayed Financing loan, a buyer can purchase a home today “as is”, and apply for a loan as soon as the next day. In this scenario, a buyer can make a cash offer, get a quick close, and turn around and get their money right back instead of waiting six months. Here is how you do it:

1. The purchase must have been an arms-length transaction.
2. The cash used for the purchase must be appropriately documented.
3. The new loan amount cannot exceed the cost of buying the home.
4. To prevent fraud, a copy of the HUD-1 from the purchase of the home will be required.
5. A title search must show there is not liens on the property.

If the home meets these criteria, in addition to the normal loan approval process, the buyer can get their money back in weeks instead of months.

Have you purchased a home recently that needed work done before the home would pass an appraisal inspection? Do you want to buy a home like this? If you are able to purchase the home in cash, you can get that money back sooner rater than later. If the home is in Georgia, contact me today, and we can get started!

footer_clayjeffreys4

 

Advertisements

QE3 is officially over

November 3, 2014

blog-author-clayjeffreys3

As promised, the Federal Reserve ended their Quantitative Easing (also called QE) program last week. This wasn’t unexpected. Toward the end of 2013, the Feds announced they would begin tapering off their purchasing of bonds, which included mortgage backed security bonds (or MBS bonds). The Feds had several objectives in buying bonds, and one of them was to help push interest rates lower. They achieved that goal by purchasing MBS bonds. As the value and demand of MBS bonds increases, interest rates decrease.

The purpose of tapering was to prevent a financial market that was accustomed to the Feds purchasing bonds from freaking out by its sudden withdrawal. A practical example – the Feds were acting as though they were introducing a fish to a new aquarium. You keep the fish in the bag of water it was placed in at the pet store, and let the fish float in the bag of water in the new aquarium to get adjusted to the water temperature of its new home. If you don’t do this prior to releasing the fish, the shock could kill it.

goldfish-bag

With the Feds officially out of the bond buying business, one of the instruments that helped interest rates reach historic lows is gone. Will interest rates rise? Most analysts thought rates would in 2014, but rates are a little lower now than they were in January 2014. That said, rates aren’t far off their historic lows from a couple years ago – meaning, rates have much more room to get worse than to get better.

One important point to clarify in the Feds statement. The Fed’s plan is to continue to keep short term lending rates near zero for the foreseeable future. Short term lending rates and interest rates are not the same thing. The short term lending refers to the Federal Funding Rate. Interest rates are determined by the value of MBS bonds, which change daily just like the stock prices of Apple, Google, UPS, etc. The Feds are no longer trying to influence MBS bonds now that QE3 is over.

What does this mean for those looking to buy a home? The simple answer is, we don’t know. Interest rates could stay the same or begin to get worse. Instead of knowing the Feds are in the background helping to keep MBS bond prices high, their values are now dependent solely on market factors.

If you are looking to buy a home or refinance, look to get started soon. Everyone has expected interest rates to rise the past few years, and they haven’t yet. Still, as I said earlier in this post, interest rates have a lot more room to get worse than to get better. If you are looking to buy in Georgia, contact me to get started.

footer_clayjeffreys4

HARP revamped

October 24, 2011

The government announced changes to the HARP program this morning (October 24, 2011). I know there will be lots of questions about the program and the changes, so let’s try a “Q and A” approach to this post!

* I’ve offset the updated portions of HARP with bold colored text. *

Q: What is HARP?

A: HARP is the Home Affordable Refinance Program, but like characters from the Lord of the Rings, it has many different names including Making Homes Affordable, DU Refi Plus, Freddie Relief, and some even refer to it as the Obama Refi Plan.

Like HARP, Gandalf has many names including Gandalf the Grey, Gandalf the White, The White Rider, Greyhame, Mithrandir, Stormcrow, The Grey Pilgrim, Tharkun, Olorin, Láthspell… you get the idea.

Q: Does anyone qualify for HARP?

A: No. There are two main items that each current homeowner must meet to qualify. First, either Fannie Mae or Freddie Mac must own your mortgage. Second, Fannie or Freddie must have received your loan prior to June 1, 2009.

Q: How do I know if Fannie Mae or Freddie Mac own my loan?

A: Great question! It is nice that Fannie Mae and Freddie Mac have both created a look-up tool to make it easier to find out if they own your mortgage. To use Fannie Mae’s, use this link. For Freddie Mac, go here.

Q: Are there any other criteria to meet in order to qualify:

A: Yes, there are other items that potential borrowers must meet. These include being current on your mortgage payments, no late payments in the last 12 months, a qualifying credit score, and borrowers still must qualify based on their income.

Q: NEW – Are there loan to value limits?

A: No, there are now no loan to value limits to qualify. You can be 200% underwater on your mortgage and still qualify to use HARP. This was previously a major holdup to homeowners qualifying to use this program, and it has now been eliminated.

Q: If I have less than 20% equity in my home, will I have to pay PMI on the new loan?

A: No, you will not have to pay PMI on the new loan regardless of the loan to value/amount of equity in your home.

Q: I pay PMI now, can I qualify for the HARP program.

A: Your PMI payments on the new loan will not go up, but the transfer of your PMI from your current loan to the new loan will require some extra steps. Let your loan officer know if you have PMI on your current loan.

Q: I have a second mortgage on my home. Can I still qualify? Would I have to consolidate into one mortgage?

A: Yes, you can still qualify for HARP, but not by consolidating the mortgages. HARP does not allow homeowners to consolidate loans. The second mortgage company must agree to subordinate behind the new first mortgage. The revamped HARP may allow auto-subordinations to occur, which will make it easier for homeowners to use HARP if they have a second mortgage.

Q: Can I refinance any property?

A: Yes, you can. Primary residence, second homes, and investment properties can all qualify for HARP.

Q: NEW – Can I use HARP with any lender?

A: Yes, you can use any lender to refinance your mortgage. Prior to the loan to value changes from 125% to no limit, homeowners were required to use their current loan servicer to go up to 125%. That is no longer the case.

Q: When will these changes go into effect?

A: Lenders should begin coming out with updated guidelines in the next few weeks. Homeowners can more than likely begin using the revamped HARP in December 2011. The HARP is currently extended to go through the end of 2013, so there is plenty of time to take advantage of it!

Q: I have more questions, and would like to get started. What do I do?

A: If the property is in the state of Georgia, I can help get you started with the refinance process. Contact me and we’ll get underway with the process and answering any additional questions you have about HARP. If the property is not in the state of Georgia, contact a local loan officer/lender to get started.

Like the Lord of the Rings, the HARP has a lot of names and details that go with it. Unlike the Lord of the Rings, it won’t be an grand, epic, and sometimes exhausting 1,000+ page read cover to cover… but both come with a happy ending!

Going Up? Down!?!

February 15, 2011

Sometimes going down isn’t the worst thing in the world… lower prices, or in this case, lower interest rates!! Let me explain.

One of my recent posts discussed the Lock and Shop program. Click the link for all the details, but in short, buyers can lock in a rate for 60 days prior to even looking for a home. This way the buyer knows their rate won’t get any worse and can put their focus on finding a home instead of trying to time the rate market.

A common question I get about the Lock and Shop program goes something like this… doesn’t a 60 day rate lock mean a higher interest rate? The answer is yes, it typically does mean a higher interest rate. That isn’t a problem when you pair it with a FREE one-time rate float down option. Let me explain.

Initially, my clients can lock in their interest rate today using the Lock and Shop program. Then once we are within 30 days of closing, if rates have improved, we can float my client’s locked interest rate down to a lower interest rate. There are no gimmicks, hidden fees, or anything along those lines associated with the one-time float down option.

The float down option is also available to buyers or home owners refinancing who did NOT use the Lock and Shop program.

How does one take advantage of the rate float down option? Well, first, you’ve got to get started! Whether you are looking to buy a home or refinance your current home, you need to be prequalified.

During the initial consultation of the prequalification process, we can determine if using the Lock and Shop program makes sense OR just move forward with a rate lock knowing with either course of action we can always float that interest rate down if the market improves.

Take the worry out of when to lock your rate. Use the FREE one-time float down option, and that is a program I am able to offer my clients.

Rates holding at historic lows

July 3, 2010

Interest rates are high, aren’t they? The experts predicted higher rates by mid year, and I even mentioned that would happen here, here, here, here, here, and here (if not more). If you read those posts, you will see there were several reasons why I (and essentially everyone else) thought this would happen. These reasons primarily revolved around the Federal Reserve ending their buying mortgage backed security (MBS) bonds.

* – definitely read the first lined post to get some more background information on that program from the Federal Reserve

SO… why are interest rates at their lowest point of 2010? Why did rates not dramatically rise when the Federal Reserve ended their program of buying bonds?

Thanks to the debacle in Europe (along with our own economy that isn’t back on its feet), investors in the US and around the world are back to buying our debt (bonds) and not those of Europe. It was the heavy investing in Europe and the Euro that caused the precipitous drop in the value of the Dollar, which motivated the Federal Reserve to begin buying MBS bonds in late 2008 and increase their value.

Why is this important? – As the value of MBS bonds rise, interest rates fall. This cause and effect pattern, heavily influenced by the Federal Reserve over the past 18 months, led us to these historically low interest rates. When the program ended this past March, everyone assumed rates would rise. Well, they obviously didn’t and there were plenty of other investors more than willing to step in and buy bonds to keep rates low!

Now for the question we would ALL love to have answered, “What’s next for rates?”

In the past when interest rates got to these low levels, they almost immediately went back up. This seemed to be the self-imposed floor. Today? Not only have rates held, but they have slightly improved. They might actually get lower this time because:

  • The US economy is definitely not back on its feet and private sector hiring is down
  • The problems in Europe are just getting started as Hungary’s credit rating was down graded and Portugal, Spain, & Italy all share similar problems
  • Analysts are mixed whether or not the bailout for Greece will actually work

Regardless of what interest rates do (and it is anyone’s guess at this point), now is the time to speak with someone to get prequalified to buy a home OR to review your current mortgage to refinance. By doing so, you would be in a prime position to take advantage of interest rates at their current levels OR ready to move at a moments notice if rates continued to fall.

If that is you, I would enjoy the chance to speak with you and get everything in order for your new mortgage.