Archive for January, 2009

What a difference a day makes (or two weeks).

January 29, 2009

So, the good news is that we know that mortgage interest rates can go lower than 5.0% . . . the bad news, is that everyone now knows just how volatile the market really is and how quickly rates can move up (ending the day between 5.25% and 5.5%).

New posts coming soon:

What is UP with closing costs?

Risk-based pricing — will make rates higher for most.

 

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit http://www.hillsidelending.com.

As good as it gets . . .

January 15, 2009

A lot of people are waiting . . . waiting on things to go lower, waiting to see what President Elect Obama does, waiting on 4.5%. 

Why??  (I really don’t know, but let me give it a shot).

Some are waiting because it only makes sense for them to refinance if rates go down a little lower.  Others (a good number of others), are waiting because they are hoping for something better.  They have “heard” that things might get better or go lower — one radio station in Atlanta (and I don’t know it was run as news or as a misleading advertisement) ran something saying that mortgage rates were currently between 4% and 4.5%.  With normal and customary closing costs, this is just not true.  It is true if you want to pay 3.5 points to buy the rate down, I guess.

Certainly, the Feds stepping in to the mortgage-backed-securities market with billions of dollars has helped to push interest rates down slightly.  (Remember, mortgage rates always move in anticipation of things, and mortgage rates went down in December on the news that the Feds would begin purchasing mortgage-backed-securities.)  The Fed’s first real purchasing began last week — they bought $10.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae backed securities and the increase in buying demand helped to keep prices (and mortgage rates low).  The Feds have said that they will purchase a total of $500 billion in mortgage-backed-securities between January and July of this year.   And this promise from the Feds, has some hoping that mortgage rates will push even lower than current levels.

What if the Fed’s actions only help to keep mortgage rates as low as they currently are — at 30 or 40 year historical lows?  What if mortgage rates can’t push much lower than 4.75%?  What if this is as good as it gets?

pic_nic

Today’s market is a great example.  More Fed dollars were injected in to the mortgage-backed securities market ($23 billion) . . . and mortgage rates have gotten worse.  Yes, mortgage rates have gone UP (not much, but up). 

As funny as it sounds, I have had more than one potential client “sigh” when I have quoted them 4.875% for a 30 year fixed-forever mortgage.  FOUR AND SEVEN EIGHTHS!  FIXED!  FOREVER!  Let me ask you this, if you have $200,000 available in cash, would you be willing to invest that money in a fixed CD, to lock the money up for as much as 30 years at a steady rate of 4.875%?  No way.  You would never do that — and that’s for the safe investment of a CD.  What about a mortgage debt?  Add the risk and costs associated with a mortgage, possible defaults, costs of servicing, losses in foreclosures, decreased property values, mortgage fraud, etc. and there just doesn’t seem to be a whole lot of room for things to go lower.

If you are waiting, I would encourage you to look at the numbers closely . . . if you are going to save money at 4.75% or 4.875%, how much more are you going to save at 4.625% or 4.5%?  Is it worth the risk of waiting? 

I would also encourage you to pick a target.  Find the number that works best for your specific siutation (based on your current rate, expected time in the house, etc) and be ready to take action if that rate is available.  In this market, one of the most important pieces of info is knowing when it’s time to take action.  Check out the recent posts below or on the previous pages (info on myRateTrack.com, promo code = the mortgage blog) to find out how you can get a target rate set — and be alerted when that target refinance rate is available.

Or, you can wait.  You can wait for 3.5% . . . did I hear someone say that  rates might go down to 3.5% in 2009 . . . I say, “sell crazy someplace else, we’re all stocked up here.”

 

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit http://www.hillsidelending.com

Shortest post in the world about whether you should take the time to look in to refinancing.

January 13, 2009

Yes.

 

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit http://www.hillsidelending.com.

Getting ready to refinance.

January 6, 2009

It is time to consider refinancing your mortgage. 

Assuming you have a television, a radio or internet access (otherwise, how you would be reading this) you have heard that mortgage rates are low.  How low?  4.5%?  Not quite, but close enough.

The media has done a good job at getting the word out to consumers that mortgage rates are low; unfortunately, it has not done a great job of letting the public know that, like the stock market, the mortgage market is volatile.  Mortgage rates dipped down to their lowest levels in some 30 or 40 years a couple of weeks ago (in the 4’s) and then proceeded to climb back up to 5.25% during the holidays.  The good news is that now with the government buying up mortgage backed securities, it looks like we may be headed down again — or at least for the time being, facing in that direction.

If you are considering refinancing your mortgage (and you should be), here are a few things you can do to get ready to refinance.

“Be Prepared.”  A great motto to live by.

pic_beprepared

 

Number 1:  Know Your Mortgage Numbers.

If you haven’t reviewed refinance numbers yet, you need to.  If you have an interest rate at 5.5% or higher, then you need to take 10-15 minutes and find out IF it makes sense for you to refinance your mortgage and of equal importance, find out WHEN it makes sense to refinance your mortgage (see my blog posts below on information about myRateTrack.com, about getting refinance numbers and on setting a target refinance rate).

Number 2:  Know Your Credit Score Numbers.

If you haven’t reviewed a copy of your credit report in the last 3 months, you need to.  With credit score based pricing (or what I call, hyper-sensitive credit score pricing), the difference between a credit score of 679 and 680 could mean an increase in your interest rate by a 0.25% or more.  Even the difference between 739 and 740 could mean a few dollars each month in savings.  In the past, a credit score of 680 and above meant you could get a mortgage at the best rate.  A year or two ago lenders changed the “best” to mean any credit score at 700 or above.  Now, and since the beginning of 2008, lenders adjust  available rates for credit scores at 660, 680, 700, 720 and 740.  To get the very best interest rate, you need a score of 740 or above.  (Lenders use the middle credit score of each borrower on the loan and use the lowest middle as the “qualifying credit score” to determine the available interest rate).

Number 3:  Know Your Market Value Numbers (appraised value).

This is becoming an increasingly common (and annoying) problem for many consumers trying to refinance their mortgages.  In the past, distressed sales and foreclosures could be discounted by the appraiser and often times not used in the overall calculation in determining the value of your home.  But, because of the increase in these types of sales, and because of lenders requirements for appraiser to use more recent comparable sales, many homes are appraising for less than expected (some less than what they were purchased for a year or two ago). 

To qualify for a conventional mortgage refinance, you need to have at least 5% of un-mortgaged equity in the property.  This equation takes in to account the total liens on the property.  So, if you have a 2nd mortgage on the house, the 2nd mortgage could actually prevent you from being able to refinance your 1st mortgage.  (The 2nd mortgage company also has to approve the 1st mortgage refinance through a process of agreeing to “subordinate” to the new 1st mortgage.  This is a separate issue, but can also be a problem in trying to refinance).  Here is an example of the 5% un-mortgaged equity.  If a borrower has a 1st mortgage of $150,000 and a 2nd mortgage of $40,000 and the closing costs to refinance the 1st mortgage are $3,500 . . . the new loan amount for the 1st would be $153,500.  So, in order to avoid PMI (private mortgage insurance), the house would need to appraise for (80% LTV) = $191,875.   But, because of the 2nd mortgage (95% CLTV, or combined loan-to-value) the house will need to appraise at $203,685.  A little confusing, I know.  It gets even more confusing if the 2nd mortgage company comes back and says that their subordination approval requires a CLTV of 85% (now, because of the 2nd mortgage, that allegedly saved borrowers from the “evil” of paying PMI [sarcasm], the house would need to appraise for $227,647). 

So, do yourself a favor.  Be prepared.  If you aren’t prepared, it won’t necessarily mean that you will have to try and sleep in a tent with a soaking wet sleeping bag and a half-inch of cold water all around you that has seeped in because you forgot to tuck under your ground cloth like your dad taught you to do (ah, lessons learned the hard way) . . . but it could mean that you pay more $$ each month in mortgage interest than you really should be. 

 

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit www.hillsidelending.com.

Best rates of the year! (now gone, gone, gone)

January 2, 2009

As we start off the business year of 2009, the one thing that stays the same, is the same thing that stayed the same, or, wait, is it, the only thing that stays the same is the thing that changes, or, is the thing . . . whatever the saying is.  New year – same story.  Volatility in the mortgage backed securities market remains even in this new year.

So, where are interest rates headed for 2009?  Well, I am not sure that anyone can answer that with great confidence accurately, but the media and the general public are certainly anticipating lower mortgage rates in the near future.  And, while that may be a possibility in the coming days, weeks or months (as the billions of dollars in mortgage assets are purchased directly by the US Treasury), for now, the best interest rates for the year have come . . . and gone.

That’s right.  This morning, the markets opened and investors published one set of rate sheets (a 30 year fixed rate loan around 5%, or so) and as the mortgage backed securities markets lost ground during the trading day, most lenders re-priced their available rates — increasing rates across the board by 0.125%.

My advice to my clients remains the same — if the numbers to refinance make sense for your situation (based on monthly savings, months to recoup closing costs in savings and the time you are expecting to stay in your home), then you should refinance.  Will you lock-in your rate at the absolute bottom of the market?  More than likely not.  Just as the stock market fluctuates (and has fluctuated wildly) so does (and will) the mortgage backed securities market.  So, if you can lock in close to the bottom — and at a rate and term that makes sense for you — then you have saved money and made a good decision.  If you wait . . . well, we’ll have to wait and see how that works out.

One thing I can tell you about interest rates, I wouldn’t recommend “waiting until next year for rates to go lower.” 

 

Jeffrey Pinkerton is a Mortgage Consultant and President of Hillside Lending, LLC and writer for “the Mortgage Blog.”  Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about available programs and interest rates, please visit www.hillsidelending.com.