New Report by Freddie Mac Shows Promise for Mortgage Refinance

new harp opportunitiesA new report by Freddie Mac showed that borrowers will save more than $1 billion over the coming year.

These borrowers were able to save money and often shorten their payment terms. In fact, of the borrowers who refinanced during the second quarter, 40% of them of them were able to shorten the duration of their loans. Now is an excellent time to consider saving money on a home loan and potentially shorten the duration of your loan at the same time.

Frank Nothaft, Freddie Mac VP and chief economist, had this to say. “The housing market realized a significant shift in the second quarter of this year as refinance activity fell below 50 percent marking the onset of the first purchase-dominated market the industry has seen since 2000 and an end to the refinance boom that started in late 2008. In this time we saw fixed mortgage rates hit all-time lows, with the 30-year fixed-rate mortgage falling well below 4 percent. We also estimate over 25 million American borrowers refinanced their loans to the tune of over $70 billion in total interest payment savings.”

What People Are Doing With Their Home Mortgages

A substantial portion of the refinancing from these mortgages came from cash out refinancing. It has been estimated that around $7.8 billion dollars in home equity was cashed out during the second quarter of 2014.

One of the reasons that this is happening is that people are building more and more equity in the homes as the economy and housing market improve. Overall, the United States economy grew by 4.1 trillion over the last two years.

How People Are Saving Through Refinancing

On average homeowners have been getting their interest rate reduced by 1.4% points. Over time this translates into roughly a 24% savings in interest payments over the life of a loan. Those who choose to refinance through HARP were able to save on average 1.6% off of their current loan. For the average borrower this translates into a savings of about 3,200 in interest payments during the first year.

If you took out a home loan before 2008 then there is a very good chance that you could potentially save quite a bit of money through strategic refinancing. Of course, in order to benefit from refinancing programs like HARP you must first be eligible for them. According to the official HARP website, you need to meet all of the following criteria in order to be able to refinance:

– The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.

– The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009

– The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.

– The current loan-to-value (LTV) ratio must be greater than 80%.

– The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

When to Consider Refinancing For a Second Time

second time refinanceAs mortgage rates for 30-year home loans slowly climb higher, now is a good time to stop and think and think about refinancing or re-refinancing that mortgage you’ve taken out.

Refinancing can not only save you money off your monthly payments, it may also shorten the duration of your home loan. In some cases, it may be possible to accomplish both of these goals at once.
Millions of people have already taken advantage of programs like (HARP) the Home Affordable Refinancing Program to save a lot of money off of their mortgage. Some may even be thinking about the refinancing a second time. It doesn’t always make financial sense to refinance a home loan two or even three times, but it can if you know what to look for.

The Best Time to Refinance Once More

To state the obvious, refinancing only makes sense if it’s going to save you money or put you in a better financial situation. You only save money through refinancing if the rate at which you’re refinancing too is lower than the rate you currently have. For example, refinancing from 6% to 4.5% is going to make a huge difference in how much you pay in the long term.

Of course, some refinancing options may shorten the duration of a home loan and make monthly payments larger. In this situation, however, the homeowner would still be saving money in the long run because they would be paying less money over time in interest.

So, even if you’ve refinancing only a year ago, it will most likely to make sense to refinance again and lock in a low rate if interest rates are falling. For the time being, that simply isn’t happening though. Interest rates are at best remaining stable or slowly going up. This means that most people who have refinanced in the last 2 years will likely have lower rates on their home loan than is currently being offered on the market.

When Refinancing May Not Make Sense

Refinancing isn’t free so being strategic about when to refinance is always important. There is a certain point at which it no longer makes sense to refinance because you will actually be spending more on closing costs and other fees than you will be saving.

The general rule of thumb is that refinancing only makes sense if you can drop the interest rate on your home loan by at least 1%. But there are sever other factors that you may want to consider. Among these factors is how long you plan on staying in the home that you’re refinancing for.

Here is one way for you to determine whether refinancing will make sense. First, find the difference between your old mortgage costs and what you’ll be paying after refinancing. If you pay $1000 now and will pay $900 after refinancing then this number will be $100. Second, divide the closing costs of your new loan by the monthly savings. This will give you an idea of how long it will take before you break even. If you only plan on being in a house for another 3 years, but it will take you 4 years to break even, then refinancing obviously wouldn’t make sense.

Fannie and Freddie Want to Play Bigger Role in Housing Market

fhfa mel wattThe housing market regulators Fannie Mae and Freddie Mac have outlined some new policies recently aimed at helping more homeowners get a mortgage as well as providing relief to troubled borrowers.

Fannie Mae and Freddie Mac don’t issue loans directly to consumers. Instead, they act as a sort of umbrella organization that insures loans against losses. They buy loans that originate from banks, securitize those loans and then sell the housing securities to investors while guaranteeing them against losses.

What Fannie and Freddie Plan to Do

One of the ways that the regulators have planned to accomplish this goal is by first holding off any reduction in the size of loans that firms are able to purchase. According to Federal Housing Finance Agency Director Mel Watt, there are plans in place to ease standards that determine when banks are required to buy back faulty loans. In time this would ease credit standards thus allowing more buyers to gain access to home purchase and refinance loans.

“FHFA will not use its authority as conservator to reduce current loan limits,” Watt told the Brookings Institution. “This decision is motivated by concerns about how such a reduction could adversely impact the health of the current housing finance market.”

Tight lending standards have made it especially difficult for first time buyers to enter into the market. And this doesn’t even take into account the fact that both home prices and interest rates have been steadily rising over the last year.

Along with helping prospective new buyers afford their first homes, one of the goals of the new measures is to help ensure mortgage market has ample liquidity. In other words, Fannie and Freddie are trying to help ensure that housing assets can be bought and sold easily without the sales affecting the price of homes.

Help for Troubled Borrowers

Watt stated that the Freddie and Fannie do not plan on taking measures to expand the Home Affordable Refinancing Program. HARP, as it is otherwise known, has played an integral role over the past few years in helping homeowners who are underwater refinance to an affordable rate. Borrowers with this program have been able to reduce the interest rates on their home loans and even reduce their monthly mortgage payments.

Instead of taking that route, there is a plan to improve servicing standards and help to improve foreclosure prevention programs. The so called “Neighborhood Stabilization Initiative” aims to target the areas of the country which have been hit by the housing collapse the hardest. The first pilot program for this initiative will launch in Detroit.

Many of the proposed changes that Fannie and Freddie are looking to implement will ultimately need to be passed through the congress. The House of Representatives is still controlled by republicans while the Senate remains narrowly controlled by Democrats. It remains to be seen whether or not there will be enough bipartisan support to pass any major bills, especially with the midterm elections just a few months away.

HARP Loans Help You Afford Your Mortgage Loan

afford mortgageThe middle class has been hit hard over the past several years. Economic downturns; job losses and stagnant pay rates have made it more and more difficult to pay the bills for millions of families throughout the United States. Fortunately there is mortgage payment relief available through HARP. If you have been hit hard by the economy and are trying desperately to hold onto your home, a HARP refinance could be the solution.

HARP Can Lower Your Monthly Mortgage Payment

You can save money on a monthly basis by lowering how much you pay on your mortgage loan. This is usually the highest expense that any family has. Traditionally, renting a home was cheaper but in the past several years rental prices have gone up, making staying in your home the best option. The challenge is that if your interest rate is high, your monthly mortgage payment will be high.

HARP loans are designed to help families reduce their interest rate so that their homes can be affordable, and they can continue living in them. This type of stability is important for families, children, and neighborhoods. Recognizing that, the HARP loan program is easy to work with.

How to Qualify for a HARP Refinance

• Owe more than 80% of your home’s value on your current mortgage loan.

• Your loan needs to be owned by Fannie Mae or Freddie Mac.

• You need to pay your mortgage payment on time.

• Your current home loan needs to have closed after May 31st, 2009.

If you meet all of these items, a HARP mortgage lender can help you to lower your interest rate and monthly mortgage payment.

Tip: You can select any HARP mortgage lender and do not need to work with your current mortgage banker.

Alternatives to HARP Mortgages

If you do not qualify for HARP, but still need to save money, there are other alternatives. For example, the FHA Streamline Refinance program can lower your interest rate and mortgage payment without ever checking your credit, paystubs, or appraised value. All you need is a current FHA home loan that is being paid on time. The FHA believes that lowering a payment will help families to make their payments on time, which will in turn lower their default rates. It is a win-win situation for everyone. The key is you need to work with an FHA approved lender because not everyone offers this loan program.

If you have a VA home loan, they offer the Interest Rate Reduction Loan, which is their version of a streamline refinance. As long as you are making your payments on time the VA will lower the interest rate of an existing VA home loan using an IRRL. A VA approved mortgage lender can give you specifics and help you to start the process.

All three of these loans can be used to save money and make it more affordable to own your home. By keeping more money in your pocket, you can pay other bills and live life more comfortably. Contact a mortgage banker today to learn how much you can save.

Homeowners Assistance Programs for Refinancing

homeowners assistance programsThe housing recovery and job growth have not yet reached a point to improve the lives of all Americans. Many people are still struggling to make their mortgage payment on time due to high interest rates. The good news is that mortgage rates are low and simply refinancing can put extra money in your pocket, making it easier to pay your bills.

Several states, like Arizona, have launched Homeowners Assistance Programs aimed at educating homeowners and providing resources they need to make their home mortgage more affordable. In California,there are the Keep Your Home programs that can assist homeowners in times of crises.

Programs that Can Save You Money on Your Mortgage Payments

FHA Streamline Refinance – If you have an existing FHA home loan,the FHA Streamline Refinance program can help you by lowering your interest rate and your monthly loan payments. Homeowners can qualify with bad credit, no job, or lower wages than they used to have. This is a fantastic way to save money using an easy refinance program. To see if you qualify call an FHA approved lender.

VA Interest Rate Reduction Loan – This is the VA’s version of a streamline refinance and can also save you money, even if you income and employment situation have changed. Speak with a VA approved lender to get current interest rates.

HARP Loan Program – HARP was designed for people that have Fannie Mae and Freddie Mac loans. In order to qualify,you need to owe more than 80 percent of your homes value. It doesn’t matter how much you owe on top of your home’s value. The key is you need to be making your mortgage payments on time.

Unemployment Help – The State of California’s Employment Development Department offers assistance to unemployed homeowners with up to $3,000 a month to go toward loan payments.

Local Loan Programs – Several cities and counties throughout the country offer local programs designed to help homeowners that are facing financial difficulties. You can learn more about California programs here.

Don’t make the mistake of thinking that because your loan payment is too high, you are making less money than you used to, or your home’s value has gone down, that you don’t qualify to refinance. This should always be the first option you look into. Refinancing can help you to afford your home and create long term, positive change in your financial situation. The additional homeowner’s assistance programs are great options for the short term but eventually you will have to go back to making your mortgage payments on your own. Lower the interest rate now can make that more affordable.

In order to explore all of your options speak with a mortgage banker that is an FHA approved lender, VA approved lender, and local expert. They can advise you and work with you to create a long term financial plan that helps your family to live in your home comfortably.

2014 HARP Loans Can Save You Money

no equity harpThe HARP mortgage loan program has been extended into 2014, and there is still time to save money on your home refinance. The HARP program was established to help the millions of homeowners that lost equity in their homes. Many families were stuck with high mortgage balances and low home values, making it difficult to pay the bills and stay in an underwater home. The goal of the program is to make homeownership more affordable by lowering mortgage interest rates and turning variable rate mortgages into fixed rate loans.

How Can a HARP Loan Help Me?

If you have an adjustable rate mortgage (ARM), you are subject to the constant uncertainty of the market. If interest rates rise, you could be stuck with payments that are far beyond what you can afford on a monthly basis. There is no way to do a long term budget when you have an ARM because you can’t predict what the payments will be. When you refinance into a fixed rate mortgage, you can create a budget you can count on. Your monthly mortgage payment will stay the same until your mortgage is paid off.

HARP can also help you if your interest rate is higher than the rates being offered today. Lowering your mortgage rate can save you hundreds and thousands of dollars. This is extra money you can use to pay down credit card debt, put into savings, and spend on regular household expenses.

Who Qualifies for HARP?

You need to have less than 20% equity in your home in order to qualify. This is the opposite of a normal home loan. Where most mortgage lenders want you to have equity, with a HARP loan you do not want equity. This means you can refinance even if you owe double what your home is worth. It is important that your mortgage loan is paid on time. If you are worried about being able to make the payment, refinance before you get in trouble.

In order to qualify your loan has to be owned by Fannie Mae or Freddie Mac and have closed after May 31st, 2009.

Do I Have to Pay PMI?

No, if you are not paying private mortgage insurance now it will not be added to your loan when you refinance.

Can I Get Cash Out?

No, the goal of HARP is to lower interest rates and fix ARM loans. You cannot increase the balance of the loan by getting cash out. Some fees associated with the loan can be rolled in, so you don’t need to bring cash to the table either.

Do I Have to Use My Existing Mortgage Lender?

No, you can work with a new mortgage banker as long as they are approving HARP loans. Some lenders have chosen not to participate.

Interest rates are rising and will continue to go up throughout 2014. If you are looking to save money or turn your ARM loan into a fixed rate mortgage, contact your mortgage lender today. Refinance now to get the maximum savings.

HARP 2.0 May Soon Run Its Course

harp 2 overRising home values are poised to offset the usefulness of HARP 2.0 as the program is scheduled to come to an end on Dec 31st 2015. This makes the need for HARP 3.0 all the more important in order to service all of those who have still been unable to refinance.

As home values continue to rise in 2014, the average homeowner’s loan-to-value (LTV) ratio continues to climb downwards. One of the implications of this is that it effectively erases much of the incentive that has been in place to refinance under HARP to begin with. Homeowner’s with low LTV ratios have a much easier time refinancing than those with high LTV ratios.

What the Future Holds For HARP

HARP was originally introduced in 2009 in order to help homeowners who were underwater on their mortgage. The stated goal was to help reduce the number of homeowners who would have to go into foreclosure by saving them money on their mortgage each month. Between 2009 and 2011 around 1 million Americans took advantage of the program.

Due to a number of restrictions that were placed on HARP, the program began to wane as the number of people eligible to refinance began to decrease. Then, in the beginning of 2012, HARP 2.0 was introduced which loosened some of the earlier restrictions and opened the floodgates to more refinancing.

For example, one of the important changes that was made under HARP 2.0 is that new applicants could have an unlimited LTV ratio. Though this allowed many new homeowners to refinance in 2012 and 2013, it’s become less important as LTV ratios across the board continue to fall.

The passage of HARP 3.0 in 2014 could finally allow all of the people who have thus far been unable to qualify to finally refinance to an affordable rate. An important feature of HARP 3.0 is that it may finally allow homeowners to refinance even if their mortgage wasn’t backed by either Fannie Mae or Freddie Mac.

HARP Eligibility Requirements

The ability to refinance mortgages that aren’t backed by either Fannie or Freddie would cause a noteworthy uptick in the number of new home refinancing applicants. Even as mortgage rates continue to climb from month to month, there are still large savings to be had by refinancing under HARP.

Of the 580,000 homeowners who remain eligible for HARP, mortgage analysts have concluded that homeowners would save around $150.00 a month on average. That is a lot of money especially when it’s accumulated month after month for years at a time.

So, if you’re interested in saving thousands of dollars every year on your mortgage with HARP, you’ll first need to make sure you qualify.

You may qualify for refinancing if:
– You’re current on your mortgage.

– Fannie Mae or Freddie Mac owns your mortgage and it was purchased sometime before May 31st, 2009.

– The mortgage you’re looking to refinance is your primary home, a single family second home, or if it’s a one to four unit investment property.

Remember even if you’re home wasn’t acquired by Fannie or Freddie, you’re not out of luck. HARP 3.0 could soon make it possible for you to refinance.

Mortgage Tips for Homeowners and Home Buyers in 2014

mortgage tips 2014Interest rates are set to rise in 2014. This is going to make it harder for borrowers to qualify and to save money on their home loan. Time is of the essence if you want to refinance or buy in 2014. Acting quickly could save you thousands of dollars and help you to afford a nicer home.

Mortgage Tips for Refinancing or Purchasing in 2014

HARP Home Loans are Still Available – If you don’t have any equity in your home, you can still refinance using the HARP mortgage program. This loan program has been extended and is available for helping families that have less than 20% equity or owe more than their home is worth. You can refinance and lower your interest rate to make it easier to afford your mortgage payments. While you cannot get cash out, it can make paying the rest of your bills easier.

FHA Streamline Refinances Close Quickly – If you have an existing FHA home loan, you could qualify for an FHA streamline refinance. They typically don’t require an appraisal which can help your mortgage refinance to close faster. Time is of the essence when you are worried about interest rates rising, making this a viable option. If you have a VA loan ask a VA approved lender about the Interest Rate Reduction Loan, the VA’s version of a streamline refinance.

Prepare your Financial Documents – It will take longer to close your refinance or purchase loan if you don’t have your documents prepared. Gather up your two most recent pay stubs, two years W-2’s, and two years tax returns. While the lender may not ask for all of this information, it is better to have it on hand so you can get it to them quickly. If you have any rental properties make sure to gather those documents, as well.

Gather your Asset Documentation – Print out your last two months bank statements (it has to be a full bank statement and not a screen print of your online banking). Also copy your 401k statements and any other asset accounts. This will be used to document cash reserves.

Sign Paperwork Quickly – Your mortgage lender will need you to sign the initial application and disclosures before your loan can be processed. If there are any material changes, you will also need to sign updated documents. Make sure you do so quickly, as those documents are needed prior to locking in your interest rate.

Lock Your Interest Rate – The only way to protect yourself against market volatility and rate fluctuations is to lock in your interest rate. Speak with your mortgage lender about your rate lock options and the likelihood that you will be able to close your home loan within that time frame. For example if your rate lock is for 20 days, but your loan doesn’t’t close for 30, you will have to extend the rate lock which will cost you money.

When refinancing or buying a home, it is important to work with an experienced mortgage banker that is an FHA approved lender to ensure you get access to the maximum number of loan options. If you are interested in refinancing or purchasing a home in 2014 call your mortgage lender today and discuss your options, before interest rates go up.