Fannie Mae Says The Party’s Over For Refinance Rates

Did you miss the boat on ultra-low refinance rates or can you still lower your payment and put some cash in your pocket? Are you kicking yourself for letting the refinance craze pass you by and are asking “Should I Refinance now that interest rates are going up?” Here are several tips to help you decide if refinancing with today’s best mortgage lenders is still worthwhile.

Mortgage Refinance Rates Are Going Up

The outlook for refinance rates in the coming months is just plain grim. Mortgage refinance rates for a 30-year fixed rate home loan inched over four percent, up from 3.5 percent last month.

Don’t panic just yet if you’ve been procrastinating yourself out of a better deal. You can still get a lower payment without paying unnecessary fees or discount points, but you’ve got to lock current refinance rates soon.

If you look at the big picture, historic refinance rates are still very low, just not as low as you could have locked them.

Fannie Mae Says Refinance Rates Not Likely Going Down

Fannie Mae’s chief economist, Douglas Duncan was quoted saying that the forecast for refinance rates in the coming months is not good. Mr. Duncan went on to say that if you can afford to lock at today’s refinance rates, “I would lock.”

If you’re floating refinance rates hoping to get a better deal the chances of catching the downside is highly unlikely. If you haven’t already had a conversation with your loan officer about locking in current refinance rates you might want to get that person on the phone quickly.

Continue reading Fannie Mae Says The Party’s Over For Refinance Rates

Who Has Today’s Best Mortgage Rates?

Are you considering a new mortgage loan to purchase or refinance your home and want to know who the best mortgage lenders are? You might think that large banks offer the best mortgage rates and consider Wells Fargo or Bank of America as a matter of convenience. One of the most common mortgage misconceptions is that the best mortgage lenders all charge the same fees and that closing costs are regulated by law. Truth be told mortgage fees vary widely and the big names you see claiming to have the best mortgage rates overcharge closing costs. Here are several tips to help you find the best mortgage rates AND lender fees.

The Best Mortgage Lenders All Charge Different Fees

The fact is that banks like Wells Fargo rarely offer the lowest fees, despite what your loan officer might be telling you. The best mortgage rates from one lender might include discount points, an unnecessary expense for most homeowners. Other lenders claim to offer the best mortgage rates and overcharge their loan origination fee.

Shopping for the best mortgage rates and the lowest fees can be confusing, especially if you’re not going about it correctly. One common mortgage mistake responsible for many of your neighbors overpaying is comparing fees from different programs. It’s impossible to make an apples-to-apples comparison of the best mortgage rates and fees if you’re comparing quotes for a 30-year fixed rate to a 15-year adjustable rate mortgage.

How to Shop for the Best Mortgage Rates & Fees

Getting the best mortgage rates isn’t hard, especially if you agree to pay unnecessary discount points. The trick is getting the best mortgage rates while paying as little as possible at closing. Fortunately, using the new Good Faith Estimate makes shopping for the best mortgage rates easy, if you go about it correctly.

Here are six steps for getting the best mortgage rates without overpaying lender fees.

  1. Pick a Mortgage Program & Stick With It
  2. Deciding up front which types of mortgage loans work best for you makes shopping for the best refinance rates and fees so much easier. If you need the lowest payment that won’t change over time choose a 30-year fixed rate home loan. Do you want to build equity and pay off your mortgage as quickly as possible? Choosing a 15-year fixed-rate home loan gets the job done. The point is decide which mortgage program is best for you and don’t let a fast-talking loan officer quote their best mortgage rates across different programs.

  3. Check Your Credit Reports Before You Start Shopping
  4. When is the last time you checked your credit reports for mistakes? If you’re finding the best refinance rates lenders are quoting you are higher than what you’re seeing advertised, the likely culprit is your credit. Spend some time reviewing your credit reports for accuracy at AnnualCreidtReport.com. If you want a free credit score with no strings attached check out CreditKarma.com.

  5. Don’t Get Bamboozled By Discount Points
  6. Lenders love to quote their best mortgage rates that include discount points first. This fee is pure profit for the bank and does nothing for you as a borrower except separate you from your cash. If you’re curious about how paying discount points affects your mortgage payment there is a table on page three of your Good Faith Estimate; however, as a starting point make sure the best mortgage rates you’re being quoted do not include discount points.

  7. Protect Your Credit Shopping for the Best Mortgage Rates
  8. Some homeowners refuse to give their Social Security number out when shopping for the best mortgage rates because they think they’re protecting their credit. While it’s true your credit score will get dinged when a lender runs your credit, you’re not getting an accurate quote if they don’t. The trick to protecting your credit score when shopping for the best mortgage rates is to limit all of your lender inquiries to a 14-day (two week) period. When you do this your credit score will only get dinged for one mortgage lender’s hard inquiry on your credit report.

  9. Use The Good Faith Estimate to Get the Best Refinance Rates
  10. You already know that it’s important to request your quotes from identical mortgage programs that do not include discount points. Once you’ve got quotes from identical programs start with the best mortgage rates and compare loan origination fees. The less you pay closing on your new home loan the more benefit you’ll get from that lender’s best mortgage rates.

    Many loan officers will tell you that one percent is standard for the mortgage origination fee; however, I’ve reviewed community credit unions that charge as little as $400 to arrange your home refi. This loan origination fee can be found on page two, section A of your Good Faith Estimate.

  11. Compare The Mortgage Lender Fees on Page Two
  12. Section B on page two of your Good Faith Estimate are the fees required by individual lenders. You’ll find that closing costs on the Good Faith Estimate vary widely from one lender to the next without explanation. Don’t be afraid to question the fees found on page two of the Good Faith Estimate and haggle with loan officers. If your broker pushes back and refuses to explain the fees that you’re questioning simply move on to the next quote.

    Make sure you’re requesting quotes for the best mortgage rates from a variety of banks, lenders and credit unions. Some of the best deals I’ve found have come from those small community credit unions that you might be overlooking when shopping for your home refinance.

Invest some time shopping for the best mortgage rates and fees using these tips and you’ll save thousands of dollars on your next home loan.

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HARP Program News: Version 2.5 Anyone?

It’s been years since the HARP program was first introduced and millions of underwater homeowners with privately held mortgages are still waiting for HARP 3. If you’re paying on an underwater mortgage held by a private lender like Bank of America or Wells Fargo instead of Fannie Mae or Freddie Mac, the news out of Washington these days has been less than encouraging. Here’s the latest HARP program news you need to know regarding your underwater mortgage loan.

HARP Program Update

HARP 3 is long overdue and has been rumored to remove the Fannie Mae, Freddie Mac requirement opening the door to refinancing privately-held mortgage loans for millions of financially responsible Americans. That’s what President Obama promised in his State of the Union Address right…help for financially responsible underwater American homeowner?

The HARP program has only been open to Fannie Mae or Freddie Mac mortgages leaving millions of Americans with privately-held home loans out in the cold. These are the same privately-held (including subprime) home loans largely responsible for the mortgage crisis.

New HARP bills come and die in Congress every year; however, the Fannie Mae and Freddie Mac requirement remains largely because investors have a stake in these mortgage loans and stand to lose a ton of cash by helping homeowners who are struggling to make their payments.

Obama Refinance Program Changes

President Obama hasn’t stopped fighting for a HARP program that’s open to everyone that needs help. HARP 3 isn’t gaining much traction in Washington but there is hope. One of the potential changes the President is looking to make is to push forward the HARP eligibility date.

While HARP 3 is part of the White House agenda, overcoming investor concerns raised by removing the Fannie Mae, Freddie Mac requirement remains a difficult issue. Removing this requirement is said to require more than the President’s executive order and would have to make its way through Congress before reaching the President’s desk to become law.

Unfortunately mortgage help for underwater homeowners is not a hot topic in Congress right now with the focus squarely on domestic terrorism rather than the housing crisis which “ended” several years ago.

Still, if HARP 3 doesn’t get approval there are other changes in the works to expand the HARP program worth noting. These changes have been dubbed HARP 2.5 by many professionals in the business.

HARP Program Eligibility Date

Under HARP 2 the cutoff date to be eligible for the Home Affordable Refinance Program is May 31st of 2009. This means that Fannie Mae or Freddie Mac must have purchased your mortgage loan before that date to be eligible. June 1st of 2009 or later is simply a day late and a dollar short until HARP 3 arrives.

If you don’t qualify for the HARP program and are underwater your only other option is a cash-in refinance. This means you’re bringing sufficient cash to the closing table to pay down your mortgage balance to a favorable loan-to-value ratio. The problem here is if you had that much cash lying around you probably wouldn’t be underwater in your home loan in the first place, so your HARP program eligibility wouldn’t be an issue.

This is little consolation for most privately-held underwater homeowners who have to wait for HARP 3 to arrive.

There is a shimmer of good news in that the proposed HARP program extension would push that cut-off date out to 2010. This only helps people with Fannie Mae or Freddie Mac backed mortgages that missed the May 31st, 2009 cutoff. (Still a significant number of responsible homeowners left out of the HARP party…)

This proposal is nothing new; it was part of bills sponsored by Robert Menendez and Barbara boxer in the Senate…also known as the place where good bills go to die. The most recent bit of legislation proposed by the duo is called the “Responsible Homeowner Refinancing Act of 2013.”

Whether or not the 2013 version of the bill will make it to President Obama’s desk is anyone’s guess at this point. The Responsible Homeowners Act of 2012 never did and died a quiet death in Congress.

What About Re-HARPing?

Another possibility is the option for people who took advantage of the HARP program the first years it came out to re-HARP. Mortgage refinance rates are quite a bit lower than they were several years ago making re-HARPing a beneficial feature for many homeowners.

The problem with proposed changes to the HARP program is that as more time passes there is less urgency for Congress or the President to take action. Part of the mentality is that if these underwater homeowners were going to default on their mortgages they would have done so already so why change a program that’s “clearly” working?

The upside of the housing recovery is that many areas of the country homes are beginning to appreciate, meaning fewer homeowners are underwater and in need of HARP 3.

If your home appreciates and you’re no longer underwater the chances are good that you’ll qualify for traditional mortgage refinancing and won’t need a government refinance program like HARP 3. (Assuming your credit is sufficient to quality for today’s refinance rates)

In the meantime stay tuned to RefiAdvisor for more HARP program updates.

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The HARP Program Strikes (Out) Again

The HARP Program (Home Affordable Refinance Program) has been extended until December 31st, 2015. This isn’t a surprise as most people thought the government refinance program would be extended. Has anything done to help underwater homeowners not in the loving embrace of Fannie Mae and Freddie Mac? Here’s what you need to know about the latest changes to the HARP program to get your home refinanced with the best mortgage lenders.

HARP Program Updates

The Home Affordable Refinance Program (HARP Program) was set to expire at the end of 2013. The Federal Housing Finance Agency extended it with hopes of helping millions of underwater homeowners waiting to get in the HARP program. Director Edward DeMarco was quoted saying the program is being extended to allow more underwater homeowners access to today’s best mortgage rates.

That sounds good, so what’s the problem preventing millions from qualifying for the Home Affordable Refinance Program?

The Federal Housing Finance Agency (FHFA) is planning to launch a nationwide advertising campaign to let you know all about the HARP program. The Home Affordable Refinance Program has been around for years and the percentage of underwater homeowners who don’t know about it has got to be very small. Awareness, or a lack of is not the HARP program’s problem.

The number of underwater homeowners out there that need educating on the benefits of refinancing their six percent or higher mortgage loans is very small considering that 21 percent of the home loans refinanced in January were HARP program loans.

What’s Wrong With The HARP Program?

The problem isn’t a lack of awareness, that’s for sure. The Home Affordable Refinance Program was designed to make it easy for underwater homeowners to qualify. Are you current on your payments? No problem, as President Obama put it you’re a “responsible homeowner” and the government wants to help you get right-side up in your mortgage loan.

The problem is that millions of underwater mortgage loans are held by private lenders like Wells Fargo and Bank of America. Because these privately held mortgage loans are not backed by Fannie Mae or Freddie Mac they are not eligible for the HARP program.

Adding insult to injury, not only does the government have to back your mortgage with Fannie Mae or Freddie Mac, they need to have done so prior to June 1st, 2009. These two requirements are responsible for leaving millions of responsible American homeowners out in the cold.

If you’re an underwater homeowner not covered by Fannie Mae or Freddie Mac your only option thus far has been cash-in refinancing. This means you’re going to pay down the balance on your mortgage to a respectable loan-to-value ratio at closing in order to qualify. The idea sounds dumb on several levels because if you had the cash to pay down your mortgage you wouldn’t be underwater in the first place.

Hope For Non-Government Back Mortgage Holders

The FHFA, President Obama, and the Congress have done nothing to ease HARP program requirements to allow re-HARPing or privately held mortgages to qualify. But there is a new (rehashed really) draft of HARP 3.0 making its way through Congress you should know about.

HARP Program 3.0 Responsible Homeowners Act of 2013

Senators Barbara Boxer and Robert Menendez have updated their failed Responsible Homeowners Act of 2012. This new bill proses to eliminate HARP program closing costs, including the appraisal while making qualifying easier.

This bill proposes to do this by removing income and employment verification for all HARP program applicants. These proposals are nothing new and do little to reduce or eliminate lender overlays. HARP program participation is voluntary and many lenders use program overlays to limit their risk. These overlays are lender specific rules enforced for qualifying like limiting loan-to-value to 125%, even though HARP 2.0 does not impose limits on loan-to-value-ratio.

Last year’s bill failed to make it to President Obama’s desk. If this year’s attempt will go the distance is anyone’s guess. Whether or not Congress or the President removes or modifies the Fannie Mae or Freddie Mac requirement is anyone’s guess as well.

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Should I Refinance? The Rule of Thumb Has Changed

Should I refinance my mortgage loan? For years financial advisors have used a dumb refinancing rule of thumb to answer this question. It used to be that you were told only refinance if your mortgage rate will go down two percent or more. This “dumb rule” left a lot of people that could be saving money out in the cold. The good news is that the mortgage refinancing rule of thumb has changed. Here’s what you need to know about getting best deal on your next home loan.

My “Should I Refinance” Rule Of Thumb

Instead of focusing on only getting the lowest refinance rates use page two of the Good Faith Estimate to figure out how long it’s going to take you to break even. If you can live with the amount of time it takes to recoup your out-of-pocket expenses then the answer to “Should I Refinance” is yes.

How you accomplish this is often easier said than done. Fortunately, there are tools available to help you get it done with spades. Here’s how you can use the new Good Faith Estimate to find the best deal for your next home loan.

What’s new about the Good Faith Estimate?

The old Good Faith Estimate was an unstandardized mess to try and figure out and compare fees. Fortunately, the new Good Faith Estimate makes this much easier. You can make the job of comparing refinance rates and fees much easier on yourself using my mortgage refinance rate shopping rule of thumb.

Refinance rate shopping rule of thumb

In order to be effective, your Good Faith Estimate needs to be used correctly. Before you can do this you need to make a few decisions about which home loan is best for you.

Which mortgage program best meets your needs? Do you need a fixed interest rate with a low payment? Choosing a thirty year fixed rate mortgage loan gets the job done. Can you afford to pay a little extra to build equity in your home? Chose a fixed rate 15-year mortgage loan. Do you have credit challenges and need a mortgage backed by the FHA? The point here is pick a mortgage program and stick with it.

Don’t let a fast talking loan officer confuse you by quoiting refinance rates across different programs.

Next, make sure the Good Faith Estimates you get are zero discount point quotes. If you’d like to see how paying discount points affects your payment amounts there is a comparison table on page three; however, you should always start with zero point quotes.

Finally, pay attention to the loan origination fee, yield spread premium, and service fees found in section A and B on page two of your Good Faith Estimates.

The loan origination fee is paid to the person and or company arranging your home loan. Most loan officers will tell you that one percent is standard; however, I have reviewed community based credit unions that charge as little as $400 for their loan origination fee. Spend some time comparison shopping mortgage fees and you can find deals like this.

What about Yield Spread Premium?

I still get negative comments from people when I talk about Yield Spread Premium. This is a credit paid by the lender when you accept higher refinance rates. It used to be that the broker could pocket this credit along with the loan origination fee as his or her commission.

The rules have changed; however, despite what you may have heard Yield Spread Premium is not illegal.

Really, it’s on your Good Faith Estimate, go look. Item two of section A reads and I quote: “The credit or charge for the interest rate of X% is included in ‘Our origination charge.’ You receive a credit of Y$ for this interest rate of X%. This credit reduces your settlement charge.”

Guess what folks that is Yield Spread Premium! By accepting higher refinance rates you’re paying less for settlement charges. That’s also how those no fee refinance offers work. Keep in mind that higher refinance rates means a higher mortgage payment and more time to recoup your out-of-pocket expenses.

How long will it take you to break even?

Now that you know which fees to look at on your Good Faith Estimate you’ll want to figure out how long it’s going to take up to break even. You can approximate your break-even point by adding up all of the settlement charges and dividing by the amount you’ll be saving each month.

This is only an approximation because there are other factors like term-length that influence your break-even point. As long as you’re not lengthening your term, going from a 15-year mortgage to a 30-year, the approximation works for our purposes.

Do you break even in a reasonable amount of time? What’s reasonable you ask? For some people two years, others four years. As long as you don’t refinance again or sell before recouping your settlement fees you won’t be losing money from refinancing.

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