Government Refinance Assistance

The fairly recent changes in the way the FHA handles its mortgage insurance requirements have made the upfront costs of getting an FHA loan less expensive while making the monthly costs are higher. To recap, the one-time upfront mortgage insurance premium to get into an FHA loan dropped from 2.75% to 1%. On a $200k loan that is nearly a $4000 reduction in fees. However, the ongoing mortgage insurance (MI) fees on FHA 30-year fixed loans went up from .55% per year to 1.15% per year. So on that $200k loan the monthly MI went from about $92 per month up to $191 per month.

But with FHA 15 year mortgages the rules are different. With FHA 15 year mortgages the upfront fee remains 1% but the ongoing mortgage insurance is 0.25% per year for loans where the loan-to-value (LTV) is 90% or less. (This means the loan is 90% of the appraised value of the home or less). When the loan-to-value is more than 90% the mortgage insurance is .50%. So on that $200k loan the monthly MI fee would be $41 for lower LTV loans and about $82 for higher LTV loans. With the average rates on an FHA 15 year loan below 4% lately a 15 year loan might be worth looking into.

As an example:

A $200k 30 year fixed loan with PMI at a 6% rate (not an uncommon loan a few years back) would have a very similar monthly payment as the same loan at a 15 year 4% fixed rate with low PMI. But over the life of the 15 year loan the borrower would save more than $160k in interest payments alone when compared to the 30 year example. And that is not to mention thousands in saving in PMI payments and the fact that the home would be paid off twice as quickly.

15 year loans aren’t for everybody but they can be a terrific choice for many families. Contact us in the sidebar to look into your options on this subject.

This afternoon the Fed made the unusual pledge to keep its lending rates at record lows for a full two years more. This action was undoubtedly spurred by the recently faltering US economy. The Fed seems to want to bring some confidence and stability back into the market.

Early results were encouraging. Not only was there a rally in the stock market, mortgage interest rates dipped pretty substantially mid-day. If you have considered lowering your interest rate now is the time to get a quote on one of the government-backed mortgages programs. Contact us in the sidebar for guidance on getting an estimate.

Over the weekend S&P lowered the credit rating of the United States from AAA to AA+. As a result stocks have taken a beating over the last few days. Yet despite this announcement from S&P, mortgage interest rates on government-backed mortgages have dipped even further this week. Part of the reason for that is that mortgage interest rates usually follow the yield on the 10 year treasury note and the yields on those T-notes has continued to drop.

While decreasing values on Wall Street is not a good thing, it has not been a bad thing for mortgage interest rates for now. Contact us in the sidebar this week to learn which government-backed refinance programs could help your family while rates remain near 50-year lows.

VA Loans are mortgages that are available to the families of US military veterans. For folks who are eligible, VA loans have some terrific benefits. Here are some of the positives of refinancing into VA loans:

- You can get up to 100% of the current value of your home. This is true even when the the refinance is rolling in a first and second mortgage (unlike HARP and FHA loans)
- There is no monthly mortgage insurance fee associated with VA loans (unlike FHA loans)
- Rates on VA loans tend to be quite low
- Overall lender fees on VA loans tend to be lower than other loans

Having said that, there is an upfront funding fee associated with VA loans. For that reason refinancing into a VA loan is not always the best option even for borrowers with VA eligibility. Still in some cases refinancing into a VA loan is an excellent solution.

Contact us in the sidebar to learn more about refinancing into a VA loan as well as the other government-backed loan programs that are available.

With the US Congress finally agreeing on a deal to avoid defaulting on US debts, demand for US bonds picked up again this week. As a result of that increased demand the yields on the 10 year T-note have been dropping and as usual mortgage interest rates are dropping as well. The upshot of it all is that rates on government-backed mortgages are very close to 50 year lows again this month.

But with so much uncertainty in the world economy right now there is no telling how long these low interest rates will be available. If you have considered refinancing your mortgage contact us in the sidebar this week to see if there are government-backed mortgage programs that could benefit your family.

If you are tracking mortgage interest rates here is a useful trick that could help. It is not widely known among the public, but mortgage interest rates tend to track to the yield on the 10-year treasury note. When the yield on the 10-year T-Note goes up mortgage interest rates tend to go up, and vice versa. So if you are wondering about mortgage interest rate trends a quick and easy way to gauge things is to look at the trends on the 10-year treasury notes. See here for an example of the last three months of that 10-year T-Note. Mortgage interest rates on 30 year fixed loans tend to be between 1.5% and 2.25% higher than the yield on this 10-year note. (Although that can vary depending on other market factors). Still in terms of macro trends on rates this is a useful tool.

As of this week yields on the 10-year note have been dropping for more than a month so interest rates have generally followed suit. That means now would be a great time to contact us in the sidebar to learn which government-backed mortgage programs might work for your family.