Posts Tagged ‘should I refinance’

Volatility Reigns

January 31, 2017

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Market volatility is going to be the theme for 2017… or at least the theme for the foreseeable future. Basically, I am picking up where I left off a couple of weeks ago. As discussed last time, Wall Street seemed to embrace the idea of a Trump administration as stock values soared after the election… well, so did interest rates. Rates rose over a point in the roughly 2 months after the election. Rates did begin to improve some until…

Stocks hit 20,000 for the first time ever. Rates went back to their higher levels since the election. Then something unexpected happened… Trump signed the executive order for the immigration ban. The Dow is off about 200 points from its all time high, and interest rates improved by 0.250% in the last few days. It is going to be a bumpy ride. If this is too much, then take a deep breath, keep calm, and…

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In addition to keeping calm and loving our pets, is there anything else that can help when buying a home in this volatile market? Yes, there is!

As briefly mentioned in my last post, there is a one time FREE rate float down on locked interest rates with Dunwoody Mortgage Services. After we lock the rate, should rates improve by 0.250% or more, then we can float the rate down to the current market for the home purchase. The rate will NOT increase while locked; it can only improve while it is locked.

Looking to buy a home in Georgia? Like the idea of locking to protect your rate, but having the option to lower should rates improve? If so, contact me today? I can get you prequalified to make an offer, and explain all the details of the float down process.

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Economic Uncertainty and Mortgage Rates

January 17, 2017

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How does economic uncertainty impact mortgage rates? I’m glad you asked!

In general, when the economic outlook is good, investment dollars go into stocks. As money goes into stocks, there is less money available to go into bonds. This flow of money causes stock values to rise, and bond prices to fall. As mortgage backed security bonds (or MBS Bonds) values fall, interest rates rise.

Some recent recent examples:

  • Brexit Vote: when the UK voted to leave the EU, that sent shockwaves through the world financial markets. Stock markets around the world pulled back, and bond prices went up. Mortgage rates improved until…
  • US Presidential Vote: Mortgage rates soared as stocks soared after Trump was elected president of the United States. Seems stocks felt Trump’s election would be a boon for business in the US. Stocks flirted with all-time highs day after day once Trump won the election. With this much money going into stocks, bond prices dropped, and mortgage rates increased by over a full point (from low 3’s to mid 4’s) in the weeks following the election.
  • US Presidential Inauguration: as the nation gets ready for the 45th President of the United States, there are signs the honeymoon period is over. A recent article said Trump would have the lowest approval rating of any President at inauguration. The gains in stocks have slowed, and there is growing concern about the “trade war” rhetoric. Maybe a trade war works out in the long run, but the short run in hurts business, hurts investments, and can cause a recession. With these thoughts in mind, we’ve seen stocks pull back over the past couple of weeks, and mortgage rate have improved.

What does the future hold? For those wanting to see lower rates, economic uncertainty is a main contributor to rates improving. It is no coincidence that all-time lows in mortgage rates occurred during the Great Recession. It is also no coincidence that mortgage rates haven’t dramatically improved since the economic recovery from the Great Recession has been slow and painful for many. And there in-lies a great dilemma… the quickest way for mortgage rates to improve (outside of Governmental influence such as Quantitative Easing) is from economic hardship. While low rates are great, in the long run, a sluggish economy isn’t great either.

Looking to buy or refinance a home? If refinancing, sitting and waiting isn’t a bad idea. I am currently watching rate for several clients in hopes they continue to drop. Once we hit our target rate, we get started. If buying, this is trickier as you can’t sit and wait for a long time on rates when there is a closing date involved! This is where our FREE one time rate float down comes in handy. Ask me about it! If the home is in the state of Georgia, contact me. We can get started today on your loan.

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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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Interest Rates lower from Brexit

July 12, 2016

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Interest rates have moved lower since the Brexit vote at the end of June sent stocks crashing, the Pound Sterling down to lows versus the Dollar it hasn’t seen in decades, and all of the politician who led the Brexit campaign quit. But how much have interest rates actually moved since the Brexit vote?

I’ve kept up with interest rates daily since 2009. Since the Brexit vote toward the end of June, interest rates have only improved by 0.125-0.250%. Based on the number of “low interest rate” stories out there, you’d think interest rates would have dropped by at least a half point and have set new all time historic lows since the vote. Why all of the stories? I think it has to do with several factors:

  • yields on treasury bonds have experienced some major change, but treasury bonds don’t impact interest rates. As discussed countless times on this blog (do a search for “MBS” or “mortgage backed security” in the search box at the top right of the main page of this blog), interest rates are impacted by the movement of mortgage backed security bonds. Those prices haven’t changed near as much as the treasury yields.
  • the big move on interest rates was back in January of this year when interest rates dropped by over a half point from the start of the month until the end of the month. Interest rates have been about at this level for most of the year.
  • why the “low rate” stories now? Well, in January, stories were focusing more on the Spring market, home sales increasing, new construction startups increasing, etc. By the time we approach July, the Spring Market is over, there is a natural lull in home sales (everyone goes on vacation in July), and something is needed to fill the 24-hour news cycle. The Brexit vote along with rates improving some since that vote provided the needed stories.
  • since this is a normal “lull” period in the housing market, marketing efforts can now be turned to potential refinances.

Are interest rates low? Yes, absolutely.

Should one consider refinancing? Of course!

But don’t get swept away by it. You want to talk with an experienced mortgage loan officer who can give you the pros and cons of refinancing. For example, this morning I spoke with someone who wanted to refinance using a 15 year mortgage and pay discount points to get the rate into the 2’s. After running the numbers, his “break even” point on the monthly savings versus the closing costs for the new loan increased when he paid discount points to lower the rate! That wasn’t a typo… by paying discount points to get a lower rate, the amount of time needed to break even increased.

In the frenzy to secure a low rate, be sure to ask questions. Work with a mortgage loan officer who watches for trends and doesn’t hop onto the bandwagon of recent events. Someone who will discuss loan options with you instead of just quoting a rate and asking you if you are ready to get started. If the home you are looking to refinance is in the state of Georgia, contact me today. I can help you get going!

Besides… interest rates aren’t at their historic lows yet. That means there is still room for interest rates to improve.

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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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Is there a better day to lock a rate?

November 10, 2015

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Last time, we discussed how mortgage rates change. It isn’t from the Federal Reserve raising rates. Mortgage rates move up and down along with the value of mortgage-backed securities. As these bond values go up, rates go down – and vice-versa.

Is there a better day to lock a rate? I think a better question is this… how much volatility can you handle?

The two days of the week that see the biggest swing in mortgage rates are Wednesdays and Fridays. That isn’t a surprise since the Federal Reserve release their meeting minutes on Wednesdays. Those meeting minutes are definitely market changers. Fridays is typically the day when economic news is released – such as the jobs report. Again, this can have a big impact on interest rates.

Mondays are the quietest day of the week as the Fed doesn’t release any information on Mondays, and very few economic news releases come out on Monday.

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Do you like to hit at 17 when playing Blackjack? If so, then waiting to lock a rate until Wednesday afternoon or Monday morning (from Friday’s market changes) might be the way to go. Depending on the market that day, you may see rates get better (or worse) by 0.125%.

Don’t have the stomach for gambling? Want to think about a rate prior to locking? Then a Monday rate quote/lock is probably best for you.

Want to know more about rates, how they change, and why you should lock. Contact me today for more information. If you live in the state of Georgia, I can also prequalify you for your new home loan.

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Coming Soon: Closing Disclosure

September 16, 2015

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Along with the new Loan Estimate, the current settlement statement (known as the HUD-1) will be replaced too. The new Closing Disclosure expands to 5 pages (currently 4 when including the signature page), but it too replaces some of the current documents we use today. Use this link for a preview of the new Closing Disclosure.

The Closing Disclosure includes the following information:

  • Page 1: recaps the first page of the Loan Estimate, which includes the loan amount, interest rate, other loan terms, closing costs (traditional closing costs and prepaids combined), and the cash to close.
  • Page 2 and 3: these look an awful lot like the current HUD-1 except in reverse order. The current HUD-1 shows the lump sum summary on page 1, and the itemization of fees on page 2. The Closing Disclosure references the itemization on page 2, and the lump sum summary on page 3.
  • Page 4: this page contains more details about the terms of the loan including whether or not the loan is assumable, if there is a demand feature, an escrow account, terms of making a late payment, partial payment, and whether or not the loan has a negative amortization feature.
  • Page 5: this page will replace the current truth in lending disclosure. The truth in lending itemization page should be eliminated with the itemization break down on page 2. The signature line is also on page 5.

While the Closing Disclosure expands from 4 to 5 pages, it should eliminate the current truth in lending form, the signature page, and maybe the truth in lending itemization page. For all practical purposes, we are really reducing the pages from 6 to 5. Less paper is always a great thing!

The biggest change of all will be when the Closing Disclosure is given to the borrower. The CFPB requires the Closing Disclosure to be sent three days prior to closing. If changes are made after the Closing Disclosure is sent out to the borrower, the three days could reset. This will definitely be the biggest challenge with the Closing Disclosure. That said, once everyone gets used to the process, we’ll be fine.

Got questions about the new Closing Disclosure? Contact me today to discuss. As always, if financing a home in Georgia, we can also talk about how I can help you with that loan!

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2015 Closing Disclosure

April 1, 2015

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Along with a new Good Faith Estimate (see my recent post on the 2015 GFE), there is a new HUD-1 . The HUD-1 is more commonly known as the settlement statement, but will be referred to as the “Closing Disclosure” beginning in August of this year.

Just like the GFE, the Closing Disclosure is combining a couple of closing documents into one form. Even with the Closing Disclosure going from three to five pages, the total number of pages should stay roughly the same.

More on this in a moment. First, let’s talk about the one aspect of the new Closing Disclosure that will be very problematic. Beginning with these new disclosures, borrowers must be given a final Closing Disclosure at least three business days prior to closing.

This is not an April Fool’s joke, and the three day requirement will be the single toughest aspect for lenders, loan originators, closing attorneys, real estate agents, etc. to implement. Currently, if a closing is scheduled for Wednesday, and closing documents go out on Wednesday, we can close on Wednesday.

Not anymore. If closing documents go out late on Wednesday, a Closing Disclosure probably would not be approved until the following business day. Then the closing will have to be scheduled three business days after the final Closing Disclosure was approved. That means this example of a Wednesday closing just got moved into the following week.

The best way to approach this change is to add more days to the closing time frame until everyone (lenders, attorneys, agents, etc.) get accustomed to the three day requirement on the Closing Disclosure. Well, add time and be patient.

As for the components of the Closing Disclosure itself, they are pretty straight forward. Click the link to view the new Closing Disclosure.

The first page of the Closing Disclosure replaces the Truth in Lending document from closing. Pages 2 and 3 are essentially the first two pages of the current HUD-1. The fourth page provides a nice summary of the loan terms, explanations, and goes into more details about the escrow account. The fifth page is essentially the third page of the current HUD-1.

The Consumer Finance Protection Bureau attempted to simplify the loan details for consumers. For the most part, they succeeded with the implementation of the new GFE and Closing Disclosure later this year. Other than getting used to the new 3 day requirement for issuing the Final Closing Disclosure, these changes should make the loan details easier to understand for consumers.

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