Mortgage Rates Review & Outlook – 4/17/09 – Houston, Spring, The Woodlands, Tomball
closing costs
Making Home Affordable Mortgage Plans Provide Option for Texas Homeowners to Refinance to a Lower Rate
While current record low mortgage rates have enabled many homeowners in Spring, Tomball, The Woodlands, Houston and Conroe to save money by refinancing their mortgage, other borrowers have struggled to qualify. Tight credit standards, declining home values, and more stringent mortgage insurance underwriting have combined to exclude many ”would-be” borrowers from the benefits of a lower mortgage rate.
In order to provide financial relief to a broader segment of the housing market, President Obama recently launched the Making Homes Affordable plan. As part of this plan, the two largest holders of residential mortgages in the country, government agencies Fannie Mae and Freddie Mac, announced refinancing plans that will make it easier for Houston area homeowners to refinance their mortgage at today’s low rates.
The Freddie Mac plan, entitled Relief Refinance Mortgage, would help homeowners who are current on their mortgage payments by enabling them to reduce their mortgage rate, or refinance from an adjustable rate, or balloon reset mortgage, to a fixed rate mortgage loan. While this program cannot be used for cash-out, or to consolidate other mortgages, the loan-to-value ratio can be as high as 105%, making it a useful program for homeowners under water with their home loan. Furthermore, under the program, mortgage insurance premiums would not increase. Fannie Mae has launched a similar program, called the Home Affordable Refinance program. This program also allows refinancing at up to 105% of the value of a home and provides the same benefit of carrying over existing mortgage insurance. Both programs also have privisions limiting the impact of closing costs.
In order to take advantage of these programs, a homeowner must act before June, 2010 when the programs are expected to end. In addition, your mortgage must be owned by either Fannie Mae or Freddie Mac, and once again, you must be current on your mortgage payments.
To take advantage of the Freddie Mac program, homeowners should call their existing mortgage provider and inquire about the program. Mortgage refinances under the Fannie Mae program can be originated through any licensed mortgage broker. Feel free to give us a call at (832) 286-1600 for more details, or send us an e-mail at info@hlstx.com.
Texas Mortgage Rates Hit Record Lows
Mortgage rates hit new record lows this past week, meaning buyers can qualify for a larger home, and homeowners in Spring, Tomball, The Woodlands, Conroe, and Houston can reduce their monthly home loan payments even more.
The Bankrate.com benchmark 30-year fixed rate mortgage index fell to 5.13%, while the 15-year benchmark fell to 4.73%. The Freddie Mac Primary Mortgage Market Survey average 30-year fixed rate, traditionally a lower rate due to statistical methods, fell to 4.78%, the lowest rate in the history of the index which dates back to 1971. The PMMI 15-year index fell to 4.52%. Home Loan Specialists continues to offer rates below the national averages to qualified borrowers.
While the outlook for economic growth slowed, existing home sales increased by 2.1% in February, the second increase in the last three months. Housing affordability, based on the Freddie Mac index, reached an all-time high in February.
We continue to believe that rates will remain at or near current levels for the short-term, but see a long-term risk of higher rates as the potential for inflation due to massive government spending seeps into the economy. With rates in the mid to high 4% range, it becomes almost a “no-brainer” to refinance provided a homeowner has long term plans to stay in their home, and has a current mortgage rate above 6 or 6.5%. Any risk of missing out on a 4.25% rate is mitigated by the risk of higher rates while a borrower rates and the time value of lost interest savings that could be realized immediately.
Today’s Fed Moves Drive Rates Down
Those of you in the Houston, Spring, Tomball, The Woodlands and Conroe areas of Texas who have been waiting for mortgage rates to drop “just a little bit more” got your wish today. The Fed made three announces that drove mortgage rates lower today and will likely keep them at these levels for the near future, benefitting new home buyers and existing homeowners through lower payments. First, the Fed confirmed that they would indeed begin to buy back $300 Billion of long-term Treasury securities in the next 6 months. In addition, they also announced that they would more than double their commitment to buying mortgage-backed securities to $1.25 Trillion for 2009. But that’s not all. Lastly, the Fed committed to buying an additional $200 Billion in debt from Fannie Mae and Freddie Mac.
All these activities had the desired effect as we saw mortgage rates drop this afternoon to well below 5% for qualified borrowers. The refinancing boom was just starting to ebb, but this move will likely have the desired effect of creating yet another wave of refinancing as new Fannie Mae and Freddie Mac refi programs become available next month. In addition, the Fed hopes this will help create some additional activity in the housing sector, a significant contributor to the current recession.
Our advice is to say, “Thank You” to Uncle Sam and move forward with those refinance or home purchase plans as record low rates just got lower!
Houston Mortgage Rate Update
The benchmark 30-year, fixed-rate mortgage fell to 5.37 %, according to the Bankrate.com’s national survey of large lenders. That is one full percent less than the rate one year ago. The benchmark 15-year, fixed-rate mortgage fell 6 basis points, to 4.88 %. The benchmark 5/1 adjustable-rate mortgage stood at 5.34%.
We see that applications are on the rise nationally, but this is a bit misleading in that many applicants are applying to more than one lender with the hopes that someone will refinance a negative equity situation based upon the current weak housing market. Locally, we have seen less application volume over the past week as consumers await mid 4% rates. Despite the national averages, here in Houston, Spring, The Woodlands, Tomball, and Conroe, Texas, we are still able to quote a rate of 5% or less on a conventional 30-year loan assuming a credit score of 720 or better.
There are also other options for refinancing exisiting mortgages. We expect to be offering the new FNMA and FHLMC ”Make Housing Affordable” refi programs shortly, which will allow homeowners with good mortgage payment histories who have been unable to refinance due to declining property values or an inability to secure mortgage insurance to refinance to a lower rate on an agency-held mortgage. Check with us and we can provide you with additional information. Good news is that much of the qualification process is streamlined, closing costs are minimized, and secondary residences qualify! Give us a call right away for details as there will be a swarm of applications once the program goes live!!!
Nine Tips To Help Your Credit Score When Refinancing Your Mortgage in Spring, Tomball, The Woodlands, Houston and Conroe
Here are nine tips to help you in improving your credit score before you refinance your mortgage:
- Obtain a free copy of your credit report from annualcreditreport.com
- Confirm your social security number and address are correct in your credit file. In many cases, people with common names will have merged credit files. This can inflate your debt service and easily lower your credit score. Furthermore, indentity theft is on the rise so you want to make sure your credit history is, in fact, yours.
- If there are any errors, you may dispute them with the credit bureau. Keep in mind, they will not just remove genuine late payment indicents, charge-offs, or judgements. You will need to show proof of your payment and its timing. Errors can easily kill your credit score.
- Insure your credit limits are accurate. A recent study found that 46% of participants had inflated or missing credit limits listed which serves to inflate the amount of debt a borrower is carrying.
- Insure that closed accounts, like a paid off car loan, are indeed showing as closed.
- Don’t cancel a credit card that you have had for a long time just because of poor service or a slightly higher interest rate. Credit scoring systems absoloutely love accounts that have been open a long time!
- Don’t allow accounts to sit idle. Charge a $10 movie ticket if you have to and pay the balance off early. This will show on-time payment and keep your reporting recent.
- “Recency is King”. Credit bureaus and lenders alike weight your recent credit history more havily than they do your past. Paying your bills on time for twelve months or longer will have a positive impact on your credit file.
- Don’t necessarily pay off small, old collections if they don’t have a recent reporting date. Paying them off might actually hurt your credit score if the creditor starts reporting them again.
For more ideas, visit our web site and request our FREE Report entitled “Understanding Your Credit Score”.
Low Texas Mortgage Rates Stick Around
Here’s the latest news on mortgage rates:
According to bankrate.com, the benchmark 30-year, fixed-rate mortgage rose 7 basis points, to 5.41 percent. Our rates at Home Loan Specialists continue to rank better than the national averages . One year ago, the mortgage index was 6.41 percent, so even though rates have inched up, we are still seeing extremely low rates due to the economic environment.
The benchmark 15-year, fixed-rate mortgage was unchanged at 4.93 percent. The benchmark 5/1 adjustable-rate mortgage rose 3 basis points, to 5.4 percent.
As I mentioned in a previous post, we have uncovered a great new lending source for jumbo loans; that is loans in excess of the FNMA & FHLMC maximums of $417k. These loans have been very tough to find as lenders have tightened credit because they cannot easily be packaged and purchased by the government. Previously, we were limited to only offering ARMs on these products or offering much higher than market fixed rates. If you are looking to refinance to reduce your rate or your term, give me a shout.
Texas Home Values Remain Stable, Good News for Mortgage Refinancing
Zillow.com just released their Zillow Real Estate Market Report for the 4th Quarter of 2008 and there’s good news for homeowners looking to refinance their mortgage in Houston, Spring, Tomball, Conroe and Houston. Overall, year over year home values declined 11.6%, reflecting eight consecutive negative quarters for the housing market. Since the market peak in 2006, values are down 17.5%. Furthermore, one in five homes sold last year was a foreclosure and one in six has negative equity.
The good news is that Texas is holding up quite well. Because most homes in Texas were not overleveraged, and did not experience the significant appreciation we saw in other parts of the country, the declines have been much smaller. Check out the map at this site to see how Texas is doing relative to other metro areas. You’ll see alot of “blue” on the coasts!
What does this mean to you as a resident of the Houston metro area? It means that it is more likely that you will be able to refinance at today’s low mortgage rates than many of your friends and relatives in other states, especially California and Florida. Your equity is more liekly to be intact. While Texas limits “cash out” refinances to 80% of a home’s value, straight rate/term refinances can be done at higher loan-to-values. Mortgage rates today are running at 5% or less, so I wouldn’t suggest waiting too long to take advantage of this opportunity; just be sure not to brag to your friends out of state!!
FHA, VA, USDA Mortgages Meet Needs of Many Homeowners in Houston, Spring, Tomball, Conroe and The Woodlands, Texas
In today’s post-mortgage meltdown environment, many prospective homebuyers in our local markets of Houston, Spring, Tomball, Conroe and The Woodlands are being denied approval by traditional lenders. Most sub-prime mortgage lenders have shuttered their doors and left investors with billions of dollars in losses from non-performing loans. Fortunately, the Federal government is offering programs that are making funds available for marginal credit borrowers, for both purchase and refinance. Unlike yesterday’s sub-prime lenders, the Feds are demanding that borrowers show a willingness to meet their obligations for at least the past 12 months. These programs are sponsored by the FHA, VA and USDA. We will briefly describe each here.
One common element of each of these programs is the generous acceptance of borrowers whose credit score exceeds only 620. Since January 1, 2009 that floor was raised from 580 reflecting the continued contraction of credit availability. However, the cash at closing minimum for these programs remains very liberal. FHA now requires only a modest (3.5%) down payment and 100% financing can be arranged through VA and USDA backed programs.
Another attractive feature of all three of these programs is that they allow the seller to contribute at least 3% toward the buyer’s closing costs. In the vast majority of today’s housing markets, sales are consummated at or below appraised value. The disparity between the appraisal and the contracted price can be applied to the buyer’s closing costs as long as it doesn’t exceed the 3% to 6% that the program guidelines allow. The buyer simply agrees to finance the higher value and the seller agrees to return that incremental value to cover the buyer’s closing costs. This is a mixed blessing for the buyer as it requires a higher loan amount which potentially adds thousands to the interest expense over the life of the loan but does allow him to bring far less to closing. Furthermore, these government approved loans also allow gifts from immediate family members, down payment assistance programs, and tax credits to further lessen the buyer’s commitment at closing. In the case of USDA and VA loans, it is common for buyers to walk away from closing with virtually nothing out of pocket even in today’s tight credit environment.
FHA loans are available to all US citizens provided that they are purchasing their primary residence only, have typical allowable debt to income ratios, have had no credit problems in the past 12 months and are purchasing a home below the maximum price as dictated for their respective county (normally $267,000 for the vast majority of US counties). FHA loans are at a fixed rate for terms of 15 or 30 years. These rates compare very favorably to the best conventional loan rates. Additionally, they carry a reduced monthly mortgage insurance premium which equates to approximately ½ the premium demanded for an identical conventional loan scenario. An up-front-premium equaling from 1.5% to 3.3% must be paid by the buyer. However, this cost can be negotiated as a seller paid concession. In other words, borrowers with marginal credit and little down payment can enjoy a very affordable rate with an FHA loan.
The USDA program offers even greater economies to the borrower. Again the qualifying credit score is around 620 and the debt to income ratios are virtually the same as FHA. However, the USDA program offers the incredible opportunity to purchase with no money down! The USDA program is designed to assist in the development of rural communities. The program is limited to families with low to moderate income levels as compared to the average statistical incomes for the respective area. The maximum allowable population for the community can be no more than 25,000. However, the vast majority of non-urban America qualifies. In the Greater Houston Metro area, significant portions of Montgomery, Fort Bend, San Jacinto, Liberty, Chambers, Brazoria, Waller and Galveston counties qualify. Here again, interest rates are very competitive with conventional programs. Finally, no monthly mortgage insurance premium is required. As is the case with FHA, an up-front closing fee is charged which can either be financed or paid for through seller concessions if available.
Veterans can also obtain 100% financing for their home purchase (or refinance) through the VA program. The veteran must only have served a minimum of 90 consecutive days in time of war or 180 days consecutively in peace time. Once again, rates for veterans are virtually identical to those of top conventional loan programs. In fact, if the veteran has suffered any disability during his or her service, further rate adjustments are deducted making monthly payments extremely attractive to honor the service of these returning soldiers, sailors and airmen. Once again, no monthly mortgage insurance premium is due and a modest up-front charge is due at closing equaling 2% of the loan amount.
Some negative characteristics of government loans are that they normally take approximately 50% longer to underwrite, are not available through all mortgage lenders, and are limited to owner-occupied residences only. If you have a good job but have had past credit challenges and haven’t been able to save for the down payment, ask your mortgage professional if he can provide a government program.
We have found that government mortgage loan programs now fill an important gap in the mortgage markets and represent an attractive option for homeowners in Houston, Spring, Tomball and The Woodlands looking to purchase a home, or refinance their existing mortgage.