According to Freddie Mac, the 30-year fixed rate mortgage is available 4.375% and the 15-year fixed rate mortgage can be locked in at 3.75%.  Whether you are considering a refinance long term fixed rate or a hybrid ARM, few people would disagree that it’s a great time to lock in a record low mortgage rate. With interest rates hovering at 4%, you can realize significant monthly savings simply by refinancing.

How Could Rates Get Any Better?

Yet mortgage lenders are reporting that they’re not seeing record activity they had anticipated with record low mortgage refinance rates.  Many homeowners have been stressed because their ARM home loan interest rate is about to reset.  Borrowers who qualify may be able to save hundreds of dollars a month by refinancing.

Best Rate and Term Refinancing Options

• FHA Streamline Refinance
• VA Streamline Refinance
• Conventional Refinancing
• Home Equity Loan Refinance

Loan refinancing costs range from $3,000 to $5,000. We recommend refinancing with a FHA or VA loan if you already have a government mortgage, because the streamline loan is the best refinance option today.  The streamline refinance enables borrowers to qualify even if they are over 100% loan to value because there is no appraisal required.  The streamline refinance is great for borrowers that are having problems qualifying for a refinance because their debt to income ratio is too high, because there is no income verification.

When to Lock Your Mortgage Rate

If you can get approved for a refinance loan, consider yourself blessed. In St. Louis, 18 % of homes were worth less than the mortgage on them as of June, according to the real estate tracking firm Zillow.com. Many other homeowners no longer have the 20% equity needed to avoid expensive private mortgage insurance. 

Many homeowners have been stuck with underwater mortgage loans as many still are unable to qualify for home refinancing.  However under the Home Affordable Refinance Program there are new opportunities for borrowers to refinance if they have they have good credit and they have been making the mortgage payment on time. The only catch is that their loan must be backed by Fannie Mae or Freddie Mac. The government-operated behemoths allow refinancing of loans up to 125 % of the home’s value. If your current loan doesn’t require mortgage insurance, you won’t need it for the refinance. You can find out if Fannie or Freddie back your loan at http://www.fanniemae.com/loanlookup/.  Mortgage refinance lenders have tightened their guidelines since they helped knock out the economy in 2008. The mortgage refinance rates you see advertised are for the most credit worthy customers.

If your credit score is under 720, you probably won’t get the best rates, says John Frank, president of Paramount Mortgage in Creve Coeur. If it’s under 640, you’ll find it hard to get a mortgage. The median credit score in the U.S. is 711, according to the scoring company FICO.  Mortgage refinance lenders are looking for people such as Kim Johnson. She walked into Paramount Mortgage last month with a high credit score and a down payment of more than 50% to put on a $190,000 home she was buying in Manchester.  From signing the contract to closing took just two weeks, and she landed a 4.5% home loan. “I was thrilled. It obviously helped me buy a little more house,” she said.

The report also mentioned that home purchase loan applications made up less than 20% of the weekly volume of loan applications. This is another sign that the housing sector remains sluggish.  Home buyers are clearly not motivated enough to finance a new home even as mortgage rates have fallen to historic levels. Last week the average 30-year home loans with fixed rates increased to 4.6% from 4.57%, according to the MBA. Clearly, low rates alone aren’t going to bring home buyers back to the market. As we’ve said before the employment numbers need to get better.

That’s because investors have begun paying more for mortgage bonds than in the past, enabling lenders to cover some home refinance costs that borrowers would traditionally bear.  Some economists are holding on to their hopes that mortgage refinancing is the second best way to stimulate the economy behind new jobs. However some insiders are not confident that another mortgage refinancing wave will have much of an impact on our nation’s recovery. While it can put money into borrowers’ pockets, some homeowners are using low refinance rates to consolidate debt, by refinancing into home loans with shorter terms and knocking off several years of mortgage payments.

Negotiate Closing Costs When Refinancing

Vince Ingui is a mortgage consultant who works with Louviers Mortgage told some borrowers recently that the key is to find out at how loan closing costs are categorized.

No closing costs out of pocket means you don’t have to pay for closing costs at closing because the refinance loan enables you to finance the closing costs into the mortgage. So in this case, the borrower would still have refinance costs but they do not have the pull money out to pay for it.

No cost mortgage refinancing is when a lender actually pays the closing costs.  The lender pays for 3rd-party lender fees like, title,  appraisal, escorw and notary.  He warns that often times the mortgage refinance rate is higher, when the company offers a no cost refinance. Ingui suggests that either they are going to make it in the closing costs or with your rate and more times than not you will pay a higher interest rate.”  Ingui warned homeowners to watch out for additional fees when they are comparing quotes for home refinancing. Beginning in January, those fees are required to be included in the so-called “good faith estimate.”  The time has never been better for mortgage refinancing if you meet the criteria to qualify.

Those economists and analysts calling for a mass mortgage reset say it could be engineered by the government, which controls the giant mortgage lenders Fannie Mae and Freddie Mac. Have them loosen underwriting criteria and offer discounted lender fees in an effort to help the distressed homeowners qualify for a fixed refinance loan that could boost their quality of life with an immediate increased cash flow..

The only way, the trend of mortgage refinancing in high volumes nationally would indicate that banks and lenders were reverting to looser refinance guidelines, one of the things that got us into this mess. It could also boost mortgage refinance rates for new borrowers and force U.S. taxpayers to shoulder more risk, since they technically own Fannie and Freddie.  Dean Baker, co-director of the left-leaning Center for Economic and Policy Research in Washington said, “At some point, we have to ask ourselves how much more can we ask taxpayers to do to support people staying in their homes.”

Wall Street has been buzzing with talk of additional mortgage relief.  HUD announced a new FHA short-refinance program that will offer mortgage aid to borrowers who saw their property value tank in the last few years.  Apparently, GMAC has been offering these FHA short refi’s to distressed homeowners residing in California.  Millions of borrowers haven’t been able to qualify for fixed rate mortgage refinancing.  Many of these homeowners have been rejected multiple times by multiple lending companies.  Unfortunately,  missing out on these record low mortgage refinance rates, is like leaving thousands of dollars on the table.

The 30-year fixed mortgage rate steadily declined for the majority of the week, hovering near 4.34%, with a steep fall to 4.29% on Monday, Zillow said.   Mortgage refinance rates on other types of home loans also fell.  15-year fixed mortgage rates were 3.85%, down from 3.87% the prior week. Rates for 5/1 ARM loans set at a fixed rate for five years and adjustable each following year, were 3.27%, down from 3.37%.  Rates for FHA refinance loans also dropped to 4.25% on averages for fixed 30-year terms.  Rates on 30-Year home equity loans fell another .15% so many borrowers looked to refinance their adjustable rate HELOC into a fixed rate loan.

We outlined below a few examples of refinance guideline changes that make the need for home mortgage refinancing help for evident as the loan process has become more difficult.

1. Home Value Code of Conduct took effect in the summer of 2009. HVCC prevents mortgage lenders from communicating with an appraiser. This new guideline addendum was created to keep refinance lenders from attempting to influence appraisers to reach a specific number for the home value estimate that sets the lending parameters for the “Loan to Value” criteria.  Appraisers have to support their opinion of value through real comparable sales and value adjustments that are accepted in the industry. 

Gone are the days when a loan officer or processor could call an appraiser to pull up some recent comparable sales to help us understand if the home value and LTV were in line with the lender requirements to get the refinance loan approved.  Honestly, loan professionals would use this step to justify whether or not a specific home value was probable. In most cases, borrowers are no required to pay COD to an appraiser who may not be familiar with the area and unfairly assess the home’s value and eliminating a significant opportunity for a homeowner to reduce their interest rate and lock into a more affordable fixed rate mortgage.  Don’t even get me started about the borrower throwing their money in trash for an appraisal that only supported them not qualifying for a best home refinance loan opportunity they will see in their lifetime. See Bryan Dornan’s article last week posted on the Nationwide Lenders Blog > Mortgage Loan of a Lifetime.

2. The 4506 is a form that was used by most mortgage lenders in an effort to nip mortgage fraud before the refinance loan closes. The 4506 enables lenders to obtain an applicant’s tax return information directly from the IRS. You see, it wasn’t too long ago that unscrupulous loan officers or loan applicants themselves would doctor up their financial documents to help improve their qualifications.  The 4506 was used by mortgage loan companies’ years ago but it was only exercised randomly for quality-control purposes as lenders were reselling the loans in bulk to banks. Today, most refinance lenders pull a 4506 on all of their loan applicants’ returns, regardless, but this step slows down the refinance process and often puts the borrower’s rate lock in jeopardy. Borrowers that want to maximize today’s low mortgage refinance rates need to be prepared to document their income, because stated income home loans are not available and the 4506 will show the lenders and banks exactly what the you are submitting to the IRS for the last few years. 

3. Most refinance lenders are requesting a recent telephone or utility bill to verify identity. Lenders want to make sure you are using your owner occupied home for refinancing.  The guidelines for refinancing second homes and investment properties are very different from primary residence home loans.  Savage jokes about the fact that the photo copy of the driver’s license, all pages of the last few months of bank statements and W-2s are not enough for most lenders to be comfortable extending an approval for home refinancing. 

Clearly the documentation requirement for homeowners to qualify for home mortgage refinancing has become time consuming and burdensome to say the least.  The question you loan shoppers need to ask yourself prior to jumping into another refinance – Is it worth it? 

Answer these questions below before getting tangled up in a refinance web that leads to a denial or a loan that could be extending the term of your home loan 5-10 years.

> How much will you save by refinancing? > Can you document your income for the last few years? > Will your income demonstrate to the underwriter that you have the ability to make your mortgage payment every month? > How is your credit?

Remember that there is more to the refinance process than just working hard to compare mortgage refinance quotes from lending companies.  You need good advice on your specific situation and mortgage refinancing help from an experienced loan professional without going broke in the process.  If all else fails and you are turned down for a refinance loan, you may qualify for a loan modification plan that lowers your monthly payment and essentially accomplishes the same goal.  See the Washington Times article >

The Mortgage Bankers Association’s index fell 4.4% in the week ended July 23, the Washington-based group said today. The mortgage refinance measure fell 5.9% from the prior week’s one-year high, but the home purchase index did increase 2%.  The average mortgage refinance rate with a 30-year fixed rate increased to 4.69% from 4.59% the prior week, which was the lowest since data began in 1990.

Best Time for Mortgage Refinancing with Record Low Rates

www.youtube.com/watch?v=kevJmfBAmM4

Jerry Mlinar an Illinois mortgage lender with Woodfield Planning recommends that borrowers who currently have an adjustable rate on their mortgage act fast.  Mlinar said, “Talk to a mortgage professional about which refinance loan best suits your criteria and qualifications is the first step.  Millions of homeowners lost their home equity when the property values plummeted a few years ago and many borrowers are no longer eligible for traditional refinancing.  Mlinar points out that borrower should only be considering mortgage refinance options that you actually qualify for.

Jumbo Mortgage Rates Available at 4.75% and Fixed for 10-Years

According to iServe Lending’s George Kaganovich, a mortgage lender in California, “This is wonderful news for thousands of California homeowners who have been stuck in adjustable jumbo mortgage rates for years.”   In high costs areas like California and New York, borrowers have been unable to refinance out of their variable rate loans.  The jumbo refinance guidelines were tightened over the last few years and the jumbo mortgage rates were significantly higher than the highly publicized conforming rates. Kaganovich said that for many of their clients it ment saving thousands of dollars a year.

Bloomberg reported that yields on the Fannie Mae bonds have advanced to 3.73% from a record low of 3.63% reached July 6th, down from 4.67% on April 5th.  The gain has been slower than benchmark Treasuries, whose yields have begun to jump as stocks rallied.

Freddie Mac reported that the average fixed mortgage refinance rate for a conforming mortgage declined to a record low 4.57% in the week ended July 8^th.   The MBA report indicated that the average fixed jumbo mortgage with a fixed jumbo declined to a record low 5.25% in the week ended July 8^th.