Posts Tagged ‘should I refinance’

That was fast – rates on the rise

April 2, 2010

Less than 48 hours after the Feds stopped purchasing mortgage backed security bonds, interest rates have already jumped 0.25% for a 30 year fixed mortgage. For information on the Feds buying MBS bonds or how this affects interest rates, see yesterday’s post OR this one OR this one OR this one… you get the idea.

The trading today has been very limited because of the holiday. That may also be why the Feds chose this date to hop out of the bond buying market. The real reaction will begin on Monday.

Regardless, lenders are pricing interest rates on more of a worst case scenario basis, thus the quick jump in interest rates. If Monday is a flat or good day for bonds, rates may stabilize and possibly move lower. However, most investors are just looking for a reason to doubt bonds and feel it is inevitable that interest rates will continue to rise. Either way, Monday should be interesting.

Waiting to lock?… don’t. As many people have said (including posts on this blog), as low as rates have been, they have nowhere to go but up.

New blog feature

March 15, 2010

Introducing Meebo… Meebo is an instant chat application that is now integrated into my blog. Meebo will allow readers to ask me question about mortgages, blog posts, or anything else.

To use Meebo, find the box titled “ask a question” that is located on the upper right side of the blog. If you see “claygj is online“, then I’m logged in and will see your question. All that is left is for you to type and submit your private question.

This will be a quick and easy way for my clients, colleagues, and friends to reach out to me even if they don’t have enough time to call. Oh, and anyone working for a company that employs an office linbacker, don’t worry, it’s so discrete I doubt he will ever notice you sending me questions.

Refinances available up to 125% LTV

March 12, 2010

Over the past several months, I’ve had the privilege of helping home owners refinance their home using the Making Home Affordable Program. The design of the program allowed home owners to refinance their home even if they were underwater on their mortgage.

Initially lenders only allowed home owners to refinance up to 105% LTV (Loan To Value – determined by the current mortgage balance versus the appraisal value of the home).

Fortunately, we are now able to offer home owners the opportunity to refinance up to the Making Home Affordable Program’s maximum limit – 125% LTV

The question now becomes, “do I qualify?” Let’s find out!

  • The current mortgage cannot have Private Mortgage Insurance. Why? While the program allows up to 125% LTV, private mortgage insurance companies are not currently insuring loans with that high of an LTV. If the current mortgage has PMI, sad to say, I coudn’t help with a refinance.
  • If there is a second mortgage, it may prevent being approved for a refinance. Why? The second mortgage can’t be paid off in the refinance, so the second mortgage would need to be subordinated behind the new first mortgage. If the home is underwater, there is a good chance the second mortgage company will not approve the subordination behind the new mortgage.

For more information on second mortgages and how they can stop a refinance dead in its tracks, see this recent post from one of my colleagues.

If the current mortgage does not have PMI and there is no second mortgage, there is only one thing left to check.

  • The Making Home Affordable Program only applies to mortgages owned by Fannie Mae or Freddie Mac. So, who owns your mortgage? To find out, search for your mortgage using Fannie Mae’s online loan lookup tool. If not found, try Freddie Mac’s online loan lookup tool.

In short, if your mortgage does NOT have PMI, you don’t have a second mortgage, and the first mortgage is owned by Fannie Mae or Freddie Mac, you are eligible and I can help you refinance!

Let’s get started now talking about details, options, qualifying rates, etc. while we are still enjoying these historically low interest rates.

is the (low mortgage rate) party over?

February 9, 2010

The party is just getting started in New Orleans (Super Bowl win + Mardi Gras = month long celebration), but it may soon be coming to an end for historically low rates.

Enjoy it while you can!

Mortgage rates hit historic lows in 2009 thanks to the extraordinary efforts of the Federal Reserve.  Back in November 2008, the Feds announced a program to buy mortgage backed security (MBS) bonds.  The reasons were two fold:

  • to help push mortgage rates lower to stimulate the real estate market
  • to create a market (or in other words, increase the value) of MBS bonds for others to buy

When the plan was announced by the Feds in November 2008, interest rates dropped roughly a half point in one day!  As the Feds began buying bonds, rates dropped down to their historic lows. The initial plan was to buy bonds through the first six months of 2009. It was extended through 2009, and extended again through end of the first quarter 2010.

At their recent meeting, the Feds reiterated their intentions to “seamlessly exit” the MBS bond market with no hint at another extension to the MBS bond buying program.  The question now is “what happens to mortgage rates?”  Take a look at the chart below.

Since mortgage rates dropped significantly on the announcement of the plan, and then continued to improve to historic lows as the Feds purchased MBS bonds, one would logically expect the opposite reaction once the bond buying program comes to an end.  In this case, and at least to some degree, interest rates should rise.

How should you proceed? Anyone who hasn’t refinanced OR is waiting until the deadline to take advantage of one of the home buyer tax credits, go ahead and get prequalified today.  Move forward with the loan now while rates are still ridiculously low.

There is not guarantee rates will dramatically increase, but also no guarantee they will stay the same.  Take advantage of the market and low rates while they are still available.