Posts Tagged ‘should I refinance’

Many can still benefit from a refinance

November 9, 2021

Mortgages rates are higher now than their all time lows. This doesn’t mean everyone has missed the window of opportunity. Sure, rates are higher, but they are still very low.

Overall, about 20% of homeowners with pre-pandemic mortgages, have refinanced per a recent study by What about the rest?

  • Close to half have yet to consider refinancing
  • About a quarter have considered, but have yet to actually refinance.

What are the reasons why people do not refinance?

  • some say they would not save enough money. Makes sense. To me, one needs to begin saving over $100 a month to make a difference. With the rise in costs of just about everything, an extra $100 per month can be valuable.
  • just about a quarter of the respondents saying it is too much of a hassle with all the paperwork. Sadly, I agree and can’t do much about the paperwork portion of the transaction.
  • unsure of how long they will remain in the home

This last point wasn’t in the survey, yet to me, it is the most important one to consider. If the plan is to move out in two years, and the monthly savings is $400 or more, a refinance would make sense. The homeowner would break even* on the cost of the refinance well inside of the two year period. Let’s say the savings was just over $100 a month, but the plan was to stay in the current home for at least 10 years. Again, the numbers show this would also make sense.

*Break even means the number of month it takes to recoup the cost of the refinance. Take the closing costs of the loan, divide it by the monthly savings to get the number of months for a break even point.

How long do you plan to remain in the home? If you answer this question, you’ll answer many more including whether or not to refinance.

Yes, rates are still low. While it probably makes sense for many homeowners, it may not for everyone. Want to find out if a refinance makes sense for you? If the property is in Georgia, contact me today, and we’ll sort out if a refinance makes sense for your situation.

What could cause rates to rise?

August 3, 2021

Mortgage rates are near their all time lows. I have clients ask me when will rates be “high” again. After many years of expecting rates to dramatically rise, my answer now is “I’ll believe it when I see it.”

While I am not expecting mortgage rates to go from their near historic low levels to 6.5% (where rates were when I started the mortgage industry), there is one thing (one word in fact) that could cause mortgage rates to jump off of these low levels – Tapering.

What is tapering? Before we get into that, what does the Fed have to taper from?

Since the start of the pandemic, the Fed continues supporting the financial markets by purchasing massive amounts of US Treasuries and mortgages.  The Fed controls short-term interest rates directly.  But they have also influenced long-term rates – especially mortgage rates – through these asset purchases.

While the Feds do not plan on raising rates this year (or next year), one thing they can do is reduce the amount of mortgage backed security bonds they purchase. The Feds used this technique to lower interest rates during the financial crisis over a decade ago, and they employed this technique again to stabilize the markets during covid.

It is unlikely that rates on home loans would have hit and stayed at these historic lows without the Fed purchasing mortgage bonds. Now that the economy is recovering, one wonders when the Fed will cut back on this program. Tapering means the Fed will start to slow down these purchases over a period of time. Even the mention of this word could affect the interest rate markets. It happened as the economy recovered out of the Great Recession, and rates will get worse when tapering starts again coming out of the pandemic.

If you’ve been thinking about refinancing, now is a great time to do it. Contact me today. We’ll run through the numbers on a new loan, compare this to your current loan, and see if a refinance is something that makes sense for your situation.

RefiNow is here

June 7, 2021

Great news if you have a loan backed by Fannie Mae… RefiNow is here!

This is the refinance program I mentioned last month. Fannie Mae is up and running with Freddie Mac looking to start their version in late August. While there are some slight differences between the two, the main tenets are the same.

The programs are designed to encourage eligible low-income borrowers to refinance and lower their interest rates and monthly mortgage payments.

  • The loan must be held by Fannie Mae (use Fannie Mae’s lookup tool) or Freddie Mac (here is Freddie’s lookup tool)
  • This is a rate/term refinance (no cash out)
  • The property must be a single-unit home with no late mortgage payments in the past 6 months (no more than 1 in the past 12 months)
  • The loan must be seasoned for 12 months prior to loan application for the refinance
  • The Borrower’s qualifying annual income cannot exceed 80 percent of the local area median income (AMI). As of this post, there is not an official lookup tool for RefiNow regarding AMI. That said, Fannie Mae does have an AMI lookup tool for another loan program they offer. Go here for an AMI lookup tool.
  • Debt to income ratio can be as high as 65% (this is way higher than normal)
  • The new loan to value cannot exceed 97 percent

In the metro Atlanta area, most areas have AMI at/around $65,000. Depending on other debt held by a home owner, a potential loan amount that would qualify for this could be in the $400s.

Thinking about refinancing but still haven’t? Why wait? Contact me today. Whether one qualifies for RefiNow or just a normal refinance, rates are still very low. In just a few minutes, we can do an analysis of your current loan versus a new one and see what makes sense for your situation.

Coming summer 2021 – a new refi program

May 11, 2021

The Federal House Finance Agency announced a new refinance product, which should be available sometime this summer. This program focuses on low-income borrowers with single-family mortgages backed by Fannie Mae and Freddie Mac. 

Under the new refinance program, lenders must ensure that the borrower saves at least $50 a month in their mortgage payments while simultaneously dropping their interest rate by at least 0.500%. The program also requires lenders provide a $500 credit for appraisals if the borrower is not eligible for an appraisal waiver.

The program will be called RefiNow, and will even include waiving the controversial adverse market refinance fee (introduced in the fall on 2020 by Fannie Mae/Freddie Mac) for borrowers with loan balances at or below $300,000.

At least a half a point drop in rate…. either no appraisal OR a credit to cover the appraisal… this all sounds great! How does one qualify?

To qualify for RefiNow, a borrower must:

  • have a loan backed bay Fannie Mae or Freddie Mac
  • have an income at or below 80% of the area’s median income
  • be current of their payments for the last six-months (with no more than one payment missed in the last 12)
  • the max loan to value of 97% (meaning, there must be 3% equity)
  • a credit score of 620+

What does 80% of the area’s median income mean?

In the metro Atlanta area, most of the median area income is $82,000. Meaning, to qualify the borrower’s income must be at/below 80% of this amount (roughly $65,000). This is not a refinance program for someone with a $500,000 loan making six figures. It is indeed targeted to lower income borrowers.

Fannie Mae has a lookup tool for their Home Ready loan program. I expect they will have something similar for the RefiNow program. To check out to see the median area income for your property, you can use the lookup tool:

Again, this is not the official “RefiNow” lookup tool. It should give someone an idea of what their max income can be and still qualify for this program.

RefiNow – Yet another exciting way for homeowners to take advantage of super low rates for a refinance coming soon to a Loan Officer near you.

Owners Love Their Homes More

April 29, 2021

Unison’s March 21 homeownership survey gives interesting insight regarding how the pandemic has impacted Americans’ feelings about their homes. It covers many different aspects of American home ownership in 2021. Here are some points that I find most interesting.

The pandemic forced Americans to do everything from home, so homes became schools, offices, gyms, and more. Therefore, 64% of respondents stated their home is more important now than ever before. 91% of respondents stated that owning a home makes them feel more successful, stable and secure. Before covid, 58% of homeowners felt an emotional attachment to their homes. After the pandemic changed our lifestyles, 70% of owners now feel an emotional attachment to their homes. Millennials reported the highest level of emotional attachment to their homes.

90% of respondents view their home as an asset as opposed to a burden. However, 29% of owners had to take some sort of action to keep up with their mortgage payments due to pandemic impacts. To weather the storm, homeowners accessed retirement savings, delayed remodeling projects, rented out portions of their homes, and sought forbearance relief. The study noted that Millennials reported the greatest economic impacts from covid.

45% of homeowners are planning a 2021 home improvement project. 33% of mortgage-holders say they would tap their homes’ equity to finance a home improvement. That’s up from 21% before the pandemic. The most popular planned renovations are kitchen and bathroom remodels. Only 4% believe creating a dedicated home work space will most improve their home life.

Finally, 37% of Millennials stated that the pandemic has made them consider moving. The biggest drivers of the desire to move are (1) needing more space, (2) reducing living expenses, and (3) job location flexibility.

The study has a lot more detail than I can cover here. Check it out if you want to learn more.

From a mortgage perspective, interest rates are still close to historic lows. Now is still a great time to buy a new home or do a cash out refinance to fund a home improvement project. If you know someone in Georgia considering a move or a refinance, please refer them to me. The Dunwoody Mortgage team can help our buyers win purchase contracts and will make the mortgage process as simple as possible.

Home improvement surges

February 2, 2021

Stop me if you’ve heard his before… inventory levels are low. Like super low. I am routinely hearing from agents they are receiving 20+ offers on their listings within 24-48 hours of the home being listed. I’ve been in the mortgage industry for 15 years now, and I’ve never seen it like this.

I’ve covered many reasons for the shortage of housing (and also famously said in 2019 that 2021 would be the year the market would begin to balance out. Wow, was that wrong). Covid has a lot to do with is. The uncertain economy/recovery has some people concerned.

Hearing the news of limited housing supply, some home owners fear putting their home on the market. They know they can sell. The concern is finding the new home. Instead, home owners are renovating their current homes. Recent stats from BuildFax supports this sentiment.

  • Money spent on home repairs soared in November; up 31.85% year-over-year.
  • Remodel volume and spend, which is a subset of home repairs that includes renovations, additions, and alterations, also increased by 6.38% and 7.60% compared to November 2019, respectively.
  • These trends (along with new construction) are causing building material costs to soar.

Given the uncertainty with the recovery, along with rising home prices due to the tight supply, some homeowners are simply reinvesting in their current home.

If this is you and you need money for those renovations, consider a cash out refinance. I have completed many, many cash out refinance loans over the past year. I can help you too!

What about those out there who have to buy a home… the family has grown… need a home office… no room for an addition on the home…. how does one set themselves apart in this market?

  • Work with a loan officer (like me) who can get you pre-underwritten. This way your offer can say the loan is approved pending the appraisal and clear title. This sets the offer apart from almost all offers out there.
  • Work with a loan officer (again, like me!) who will talk with the listing agent to let them know how smooth of a closing to expect.
  • Do everything in your power to make a non-contingent offer.

Need money for a renovation on your home?… Want to know more about some of those items mentioned above for your home purchase?… If the home is in the state of Georgia, contact me today. Whether it is a refinance or a purchase, I can have you pre-approved for a home loan same day. I can get a pre-underwritten approval in just a couple of days. It can be that quick!

Give Yourself a Raise!

December 31, 2020

A recent mortgage industry headline surprised me, “Many Homeowners Still Missing Out.”  The subheading read, “80% of owners have not refinanced.”  Given that interest rates have reached historic lows, with less than 3.0% rates often available for 30 year mortgages, I’m really surprised that so many people have not refinanced.

The article provides the following statistics:

  • Almost 30% of mortgage holders do not know their current interest rate!!
  • Almost 20% of borrowers have refinanced in 2020.
  • Over 25% have considered refinancing but have not done it.
  • And over 50% have not even considered a refinance.

I am now doing refinances for customers whom I refinanced in 2019.  Mortgage interest rates have continued dropping to the point that a second refinance now makes financial sense for some of my clients.

If you have a mortgage on a Georgia home, here are a couple of clues that you might want to talk with me about refinancing now:

  1. Your interest rate is above 3.5%.  The rate typically shows on your mortgage statement.  Take a quick minute to look at it.
  2. You obtained a FHA loan more than 2 years ago.  With recent home appreciation, it’s worth exploring a conventional refinance in hopes that you can eliminate the FHA mortgage insurance.

The ultimate consideration is how much will the loan cost as compared to how much you can save monthly.  Yesterday, I talked with a former purchase client.  In 2016, she bought a house with a 3.5% down FHA loan at a 3.75% interest rate.  That was a great deal for her….back then.  Since she bought the house, it has appreciated over $100,000.  With her increased equity, doing a refinance now would lower her interest rate almost a full percentage point, and she would eliminate the FHA mortgage insurance that costs her $155 every month.  Her total monthly savings could be around $330.  I estimate a refinance will pay for itself in just over a year.

What about you?  Is your interest rate over 3.5%?  Do you have a 2 year (or older) FHA loan?  Do you want to give yourself a raise by lowering your monthly mortgage payment?  If yes, give me a call.  I can easily help you analyze your current situation to see if a refinance makes sense for you.  Don’t wait too long.  Who knows when interest rates will start rising.

The Cost of Refinancing is Going Up

September 23, 2020

Historically low mortgage interest rates have created a refinance “boom” in 2020.  Millions of homeowners have realized significant monthly savings by lowering their interest rates.  Current rates are still very low by historic standards, but refinancing is now getting more expensive.

Several weeks ago, mortgage giants Fannie Mae and Freddie Mac announced a new 0.5% “Adverse Market Refinance Fee,” applied to all mortgage refinances (not purchase mortgages).  They announced this fee as a risk management step to address “loss forecasting precipitated by continued economic and market uncertainty.”  In layman’s terms, Fannie and Freddie are collecting this new revenue to offset losses from expected foreclosures due to the pandemic and related economic stress.

Fannie and Freddie announced that the new fee would be effective for all loans they purchase starting on September 1, 2020.  There was an immediate outcry from the mortgage industry.  One mortgage association executive called this new fee an “ill-timed, misguided directive,” and urged its repeal.  The same executive noted that the fee will raise interest rates on “families trying to make ends meet in these challenging times.” Fannie and Freddie relented, a bit, and delayed the implementation of the new fee until December 1.

What does that mean now if you want to refinance?  It may be too late to avoid the fee.  Many lenders are now pricing this fee into their published interest rates.  Why so early?  It can take a lender 30 – 60 days to package closed loans and sell them to Fannie and Freddie.  Since lenders will pay this fee beginning December 1, loans locked for 30 to 45 days in late September may not be sold to the mortgage giants until after the December 1 fee date.  The lenders don’t want to pay the fee themselves, so many are now passing the fee along to their customers.

What does this mean for new mortgage customers?  Well first, if you want to buy a home, the fee does not apply and you can still take advantage of the lowest interest rates in history.  Call me to get prequalified and then you can start your home search.  Secondly, if you bought a home in 2017, 2018, and early 2019, it might still make good financial sense to refinance now, even if you have to pay the fee.  Call me and we can evaluate your current mortgage versus a new mortgage.  I can calculate your monthly savings, your loan costs, and determine a “return on investment” period for you.  I often hear investment advisors recommend, “Don’t try to time the market.”  I think that applies to a refinance.  If the numbers make good financial sense now, don’t wait for rates to fall further, because they could go up instead.  Let’s talk and evaluate what’s the best move for you now.

Furloughs, layoffs, and low rates

June 9, 2020

The Covid-19 virus created a = interesting dynamic in the housing market (and also for those looking to refinance). The impact on the economy helped push interest rates down to record/near record levels. Covid also caused unemployment to jump for record lows to around 15% (before improving some from the May jobs report).

This combination is interesting for home buyers and home owners. Yes, rates are low (super low). Yet millions of people considering a home loan find themselves either temporarily furloughed and/or laid off from their jobs. The income needed to qualify to take advantage of these super low rates is now missing.

How does one qualify when furloughed/returning to work. It is not as bad as one may think:

  • for those who received a temporary reduction in pay, an updated pay stub showing the new income. Also an updated verification of employment from HR stating the new pay. As long as the buyer still qualifies at the reduced pay, then no need to wait for their salary go back to normal.
  • for those who are furloughed, so far all that is being required is an updated pay stub showing normal income and documentation from HR (such as a letter or an updated Written Verification of Employment) stating the employee is no longer furloughed and back to work full time.
  • for those laid off and finding a new job, if the new job is a W2 salaried position, the first pay stub at the new job.

One doesn’t need to worry about a job gap at this time. When out of work for 6+ months, additional requirements could apply. Considering furloughs/lay offs began in mid March, we are well inside of the 6 month time frame for being unemployed.

I’ve even helped someone buy a home who was furloughed and the brought back to work at 75% of their normal salary. As long as one qualifies at the reduced level, we are good to go.

Two areas I did not touch on that are very important – self employed and those who took advantage of mortgage forbearance. My colleague Rodney Shaffer posted on these topics last month, and you can find those posts here (for self employed) and here (for forbearance).

Covid-19 causing problems for your home buying plans? Impacted by being furloughed, laid off, or a reduction in pay? This doesn’t mean buying a home in 2020 is no longer an option. Contact me today! If buying a home in the state of Georgia, we can run some numbers and see where everything stands. You may be able to buy a home faster than you think!

More changes due to Covid

April 21, 2020

I know… I know…. we’ve had our fill of Covid related news. I hear you! I know your head is probably spinning trying to keep up. Mine too! To compensate, let’s get straight to the point!

A post from earlier in April detailed changes in the mortgage industry. One of the changes focused on the increased scrutiny of continued employment due to many layoffs/furloughs throughout the country. Since the post, we’ve experienced more changes.

  • Year to Date Profit and Loss statements are often being required for self employed borrowers. This is to show stable income in the time of Covid.
  • Those getting temporary or permanent salary reductions can still qualify for a home loan. So long as we can show the updated income (pay stub reflecting the reduced pay), and the borrower still qualifies for the loan with the reduced pay, then we can proceed as normal.
  • Investment accounts had a mandatory manual reduction of 50% from the statement balance due to the losses in the stock market (if an investment account shows $200,000, then we could only use $100,000 toward the loan). With the rebound in stocks, the manual adjustment is now 30%.

While the entire experience right now can be frustrating, underwriting has shown some flexibility:

  • P&Ls: I had a client closing where half of their income is earned in the 4th quarter. If you took the first quarter earnings and multiplied by 4 to get a yearly total, the pace would be way off! I had my client compile a P&L from the first quarter in 2019 to compare it to year to date 2020 to show income is similar when compared to the same time last year. The loan was approved.
  • Normally when there is a reduction of income/hours, we need to show the reduction has been in place for a period of time (not just one pay period). Well, we have successfully closed clients after one pay period of the reduced pay so long as they still qualify for the loan with the reduced pay.
  • Updates are happening in relatively real time as the investment account requirement updated as market conditions improved.

I feel underwriting is trying to work with us during this tough time while still meeting the agency guidelines. I’ll work with my clients to present the best case for continued stability of income for those who are in the loan process and being impacted by the fallout from Covid.

Thinking of getting a home loan right now? Rates are still low for those looking to refinance… people are still out looking for homes to purchase. The housing market is still very active. Contact me today, and we can talk about how Covid will impact your ability to purchase a home (if any impact at all). If you are looking to get the loan on a property in the state of Georgia, I can gladly help you with the loan!