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Jan
13

Mortgage Refinancing Applications Surge

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According to MBA, mortgage refinance applications increased last week as homeowners looked to seize on record low interest rates. The jump in refinance applications came from all over the country as borrowers from California to Maine were seeking lower monthly mortgage payments once again.  The Mortgage Bankers Association reported yesterday that overall activity surged nearly 4.5% for the week ended January 6th. Most analysts predict that the mortgage refinance rate will remain at record lows for most of 2012.

Home Mortgage Refinancing Volumes Continue to Soar with Record Low Rates

The index got a boost from a 3.3% increase in refinance loans while consumers looking for a home purchase loan spiked 8.1 % from a week earlier.  The refinance loan share of home financing activity fell to 80.8% of total applications from the prior week’s survey high of 81.9%.

The fixed 30-year refinance rates, on loans with conforming balances ($417,500 or less) rose to 4.11% from 4.07%. The jumbo rates fell to 4.34 % from 4.41%.

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Economists are hopeful that an effective mortgage refinance program that extends relief to distressed homeowners who are stuck with underwater mortgages could help the country finally bury the housing crisis. Although the Obama administration announced the latest version of Home Affordable Refinance Program a few months ago. The details of this new version called HARP 2.0 are just being released to mortgage originators.

There has been a loan program in place, HARP, under which lenders were able to refinance underwater homeowners. The original HARP mortgage program theoretically allowed a homeowner with a loan held by Fannie Mae or Freddie Mac to refinance a current mortgage that was up to 125% of the home’s current value. However, even though Fannie and Freddie allowed lenders to go up to 125%, most lenders would impose their own restrictions that held their maximum loan amounts to 105% of a home’s value. Historically, lenders have only allowed refinancing up to 90 or 95% of a home’s value.

Basically, the new version of HARP 2.0 has waived all loan to value requirementswill allow homeowners to refinance without regard to income, credit score or home value as long as the current mortgage is larger than 80% of the home’s value. Only those loans originated before May 31, 2009, will qualify. There has been much discussion about what rates will be offered under this program. Although the pricing is not supposed to be risk-based, the rates could be higher than for conventional refinances. In the past 125 loans and bad credit house loans carried higher interest rates.

Considering that homeowners who can take advantage of this program will likely not get another chance to refinance an upside down mortgage and given that neither Fannie nor Freddie will expect lenders to pay back loans that go into default, the new HARP loans should help lenders retain their servicing portfolios, which in turn will encourage them to offer these loans. Unfortunately, loans that were not sold to or guaranteed by Fannie Mae or Freddie Mac will not qualify, which leaves out many of the loans that really would benefit from refinancing like jumbo loans and the negatively amortizing loans and other creative loan products that were so popular with World Savings, Washington Mutual and Countrywide, as well as others.

There is also confusion as to whether or not homeowners with second mortgage loans and HELOCS will be able to take advantage of this program. To find out if your loan is owned or guaranteed by Fannie Mae or Freddie Mac, go online to either Fannie Mae HARP or Freddie Mac Home Affordable Refinance. This refinance program is for primary residences, second homes and investment properties. To qualify, homeowners cannot have had a mortgage late in the past 12 months and the new payment must be either more affordable or more stable than the current loan. We assume that a homeowner may include closing costs in the new loan amount but may not receive any cash back from the refinance. As of December 1st, HARP loans can be originated and the Obama administration says the program will end December 31, 2013.

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Feb
26

Conventional vs. FHA Refinancing

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In today’s tough economy borrowers need all the savings they can get so comparing conventional and FHA refinancing options is a smart move.  Now more than ever, homeowners who need to refinance like to compare traditional loan options to government mortgage programs. There are benefits to both a conventional and FHA mortgage, so the pros and cons come into play based on your needs and loan eligibility.

Compare Conventional and FHA Refinance Loans

The Federal Housing Administration provides a number of options for homeowners, from loans to refinancing. Refinancing a home can be an excellent way to reinvest in your property, and offers a number of different benefits. There are a number of key differences when it comes to conventional vs. FHA refinancing, and knowing these differences can help you tackle the prospect of refinancing your home a little more easily. Here, we’ll go over some of the basic information behind a conventional and FHA refinance, respectively, so that you can decide which is right for you.

HUD has extended FHA refinance guidelines to offer several options for homeowners. The first type of FHA refinance is the cash out refinance, which is typically chosen by home owners whose property has increased in value since they originally purchased it. Cash out refinancing enables the home owner to refinance an existing mortgage by taking out another mortgage for more than they currently owe. On the other hand, home owners also have the option of a streamlined refinance, which is called such because it enables the homeowner to rapidly reduce the interest rate on the current loan. This can usually even be done without getting an appraisal, cutting down on paperwork and saving you time and money.

One benefit of FHA refinancing is the streamline refinance option. With the FHA loan, borrowers get quick access to home refinancing if interest rates fall below the rate they locked into.  The streamline refinance program enables borrowers to revise their terms without an appraisal and in most cases without income documentation. With the conventional loan there is no streamline mortgage refinance option, so borrowers would need to start the process all over again.

FHA mortgage refinance programs are only available to home owners who are using the property they wish to refinance as their principal residence. Conventional refinance loans have very strict guidelines and requirements, such as higher credit scores. Conventional refinancing can sometimes incur penalties if the refinancing is not done at the proper time, and thus sometimes people can get trapped into not being able to refinance when they want to. That said, one disadvantage of FHA refinancing compared to a conventional mortgage is that FHA insurance is not cancelled when the home owner reaches 22% equity, although some home owners are eligible for an FHA insurance refund.

Great Rates on FHA and Conventional Refinance Loans

Conventional vs. FHA refinancing requires some careful consideration, and there are certainly advantages to each. Years ago, FHA mortgage rates were a bit higher, but these days conforming and FHA rates are typically the same. Today, most lenders offer the FHA mortgage product because it is available to those with poor credit scores and is more flexible than a conventional mortgage.

One thing to keep in mind though is that HUD has promised increased fees and mortgage insurance premiums for FHA loans, so refinancing with FHA could lose some luster if the insurance hike swallows your savings. Taking these factors into account can help you get the best type of mortgage for your family, and get you the home you want.

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