Mortgage Rates Hit Another Record Low

According to the Primary Mortgage Market Survey the national average for the 30 year fixed interest rate has dipped below 4%.

The average 30 year rate is 3.94% with .8% in fees and points.

This rate sets a new record low for interest rates. The first week of October in 2010 the average 30 year rate was 4.27%.

What does this mean for borrowers?

Now is an excellent time to be able to purchase a house, or if you have equity to refinance. There are reports that some borrowers are still on the fence, wondering if rates are going to bottom out anymore.

Last year there were the same concerns. A common question we got was, “Are Mortgage Rates Going to Go Up in 2011?

At the end of 2010 mortgage rates started to rise. It looked like rates in 2011 would go up and stay up. In February rates hit 5%, but sense then have again declined to the current record low.

Investors are still extremely cautions, the economy remains in shambles, there is a threat of a second recession, unemployment is still very high, the housing market has not turned around. All of these factors are contributing to the low interest rates.

Are the low rates going to stick around?

Yes and no. In there short term there is no economic forecast that would suggest rates will increase “over night”. Once mortgage rates increase for good it will most likely be a slow process following the recovery of our economy and the housing market.

Should I buy or refinance?

Yes. Record low housing prices and record low rates is a recipe for a great home with a low payment. Even if house prices stay low for a few more years it is still an incredible opportunity to purchase a home. In fact never in the last 50 plus years have Americans had the opportunity to get locked into such an incredibly low 30 year interest rate.


Top 3 Refinance Tips To Get That Loan

Mortgage rates have only been dipping lower and lower these past few weeks ever since the sudden economic dip last August. A month later, rates are still going down making this the perfect opportunity for home buyers and refinancers to avail of extremely low mortgage rates. Last week the benchmark 30-year fixed mortgage rate fell to a record low of 4.35%, allowing borrowers to pay off their loan in half the time they initially planned for.

Because of the continued low rates many home owners are now seeing the opportunity to refinance, causing a sudden increase of refinance applications. This increase in the volume of applications leave some lenders scrambling to keep up, processing loan requests longer than they usually do. Instead of taking 15-30 days, refinance loans are getting approved within a 45 to 60 day margin. Because of this, any lack of documentation on the borrower’s part could cause a major set back in the process potentially losing the opportunity of locking in those juicy rates. As a borrower in these times, it’s important to stay on top of the game by taking note of these 3 tips:

1. Prepare all Documents – When applying for a refinance loan, make sure you’ve got everything you need all in one go. This includes paystubs, W2s, bank statements (including all pages) and tax returns. Once you see a rate you’re comfortable with, immediately submit these documents to your lender within a day.

2. Keep Frequent Communications – It is possible for underwriters to ask for more documentation and it is best to keep in constant communication with your lender so you will know what to prepare without having to wait for their call. It is reasonable to check in with your application once or twice a week, doing so will remind your loan officer about your application, making sure its not left underneath a pile of other loans.

3. Establish Expectations – Before even beginning the refinance process, it is important to ask your lender just how long the documentation is expected to pull through. Borrowers should ask lenders the time frame in which they expect to close the loan and lock their rate. Usually borrowers lock rates for 30 days in the hopes the loan will close within this time. However, this time frame is no longer feasible and refinances usually takes at least 45 days. It is best to lock in a rate for at least 45 days to eliminate extra fees to extend the rate.

There really is no telling for how long these low rates will last. Instead of waiting for rock bottom, it is best to act quickly and apply for refinancing while its still early to do so.


No Credit Check Refinance – Is it possible?

When you apply for a mortgage one of the very first things you will need to do is give your social security number so your broker or bank can pull your credit.

What if your credit is terrible and you don’t want your credit to be pulled?

In all honesty it is very unlikely that you find a lender willing to fund a mortgage without your credit being check, although there are a few exceptions to this rule.  Your credit score is not the only, nor the most important factor in determining if you qualify.

Lenders and banks understand that some people with a stronger financial portfolio may have poor credit.  (stronger in the sense that you are able to comfortably afford your mortgage payment.)

It comes down to risk for lenders.  If you can show that even though your credit is poor you have the means to make your mortgage payment every month you may be able to qualify for a refinance.

If you have missed a mortgage payment in the previous year or two it is unlikely you will qualify because this dramatically weakens your position.  You want to show good payment history, strong monthly income and it is very important that you have money in reserves.  Which simply means money in savings, a liquid retirement account or something similar.

If you can show the lender you can comfortably make the payments and are a low risk borrower you may be able to refinance with less than stellar credit.

Here is a break down of the important factors when qualifying for a mortgage.

  • DTI (Debt to Income) – If your DTI remains under 30% it shows you earn enough money to comfortably make your mortgage payment.  The lower the better.
  • LTV (Loan to Value) – The lower the Loan to Value on your home the stronger it is.  If you only owe 70 or 75% of your houses value you become lower risk.
  • Income – Income is a main factor in determining your DTI.
  • Assets – If you can show 6 months of assets, this will really strengthen your file tremendously.  Assets, particularly liquid assets, help show that even if you lose your job or run into financial difficulties you can still make your mortgage payment for a number of months.
  • Payment History – A clean mortgage payment history (meaning you have no 30 day late payments) shows you are a trustworthy borrower.

In conclusion if you can show strength in the other areas of your mortgage than the credit score factor may be minimized or eliminated.

Some people never even build credit and literally have no credit, but can still purchase a house.  This is because these other factors are strong.  Plus in this case if we are looking to refinance the fact you already own the home helps tremendously.


Can You Refinance an Upside Down Mortgage? Hint: the answer is Yes…

Until recently I did not realize that it was even possible to refinance a mortgage that was upside down.  I assumed that if someone owed more on their home then it was worth they were out of luck.  I figured these record low rates were just out of reach for them.  In fact… Out of reach for ME.

Yes… just like hundreds of thousands of other American home owners I now owe more on my home then it is worth.  At least it is really close.  I may be able to break even.

I am watching the interest rates drop and drop and drop and drop… you get the picture, and I just have to sit on my “terrible” 5.5% 30 year fix.

Well I have some great news for those of you in this situation.

There is a loan specifically created for people in this scenario.  There are a few guidelines and here is what we know so far.

  • You current loan has to be a Fannie Mae or Freddie Mac loan to qualify as this is a Feddie/Fannie loan.  This is easy to find out.  For Fannie Mae click here. For Freddie Mac click here.
  • You cannot be over 105% LTV (loan to value). This simply means that your house value can only be 5% lower than what you owe on it.  (ie. If you owe 210K, your house could be worth 200K)
  • In order to avoid mortgage insurance your current loan cannot have it.
  • You must have a credit score of 680.

These are the main guidelines for this loan.  If you are in a similar situation it may be worth calling your loan officer to see what they can do for you.

If I can qualify for this loan I would personally drop my rate into the low 4% range and save big bucks every month.  I already have my application in as we speak.

If you are in Washington State check out Clark Davis.

Remember that your loan scenario is going to differ from others.  Contact a professional to get all the details you will need to see if you qualify.


Mortgage Rates Drop Again – New Record Oct 7th

According to the Primary Mortgage Market Survey from Freddie Mac the new average mortgage rates have yet again hit a new low.

October 7, 2010 30-Yr FRM 15-Yr FRM 5/1-Yr ARM 1-Yr ARM
Average Rates 4.27 % 3.72 % 3.47 % 3.40 %
Fees & Points 0.8 0.7 0.6 0.7

This information is based on Mortgage Companies all over the nation.  Freddie Mac compiles the information and averages it out to determine where rates stand today.

Is time to take Action?

You know from reading my mortgage updates in the past that I believe it is no time to drag your feet.  If you are in a position to be able to refinance now is the time to jump on board.

What if you are say 12 years into a 30 Year mortgage, is it worth refinancing then?

This is an excellent question and one that takes some research on your part to answer.  If you are around 12 – 15 years into your mortgage then chances are you are paying much more of the principle with each and every payment.  (Interest is front loaded and you pay nearly 90% interest in the first 10 years of a mortgage.)

Therefor if you are paying mostly principle now why refinance.  Well in this case there are only three factors you need to consider and that is TERM, TERM and TERM.

If you can refinance into a 10 year mortgage and have a similar payment because rates are so low, you just knocked 8 years of your mortgage.  Do not and I repeat DO NOT refinance into another 30 year mortgage if you are many years into your current 30 year fixed.

Consider your options and have your loan officer show you the options for a 10 year and 15 year mortgage.

If you want some more help check out our mortgage tips.


Long Term Rate Locks? & Sept 24th Mortgage Update

The Freddie Mac Primary Mortgage Market Survey is showing average mortgage rates are unchanged from last week.

This weeks rates are…

  • 30-Yr Fixed – 4.37 %
  • 15-Yr Fixed – 3.82 %
  • 5/1-Yr ARM – 3.54 %

There was one slight decrease for the 5/1 ARM.  Last week it sat at 3.55%

Old Article? See todays Mortgage Rates.

If you are still on the fence about locking today or waiting just a little longer consider this.

Mortgage Rates have not been this low for over 50 years.  Plus mortgage rates are subject to change any minute.  They could shoot drastically up at any point leaving you in the dust.

If I was in a place to refinance or if I was purchasing a home I’d definitely be calling my broker and locking today.

Is it worth Locking Long Term for Purchases?

Rates are so low right now many people are locking in rates for 90, 120 and even 150 days in the event they find their home in the next few months.  Depending on how seriously you are currently looking for a house this may be an option suitable for you.

Be careful to not lock too far out because the length of your lock will affect your rate.  The longer the lock period the higher the rate will be.

The benefit of doing this is because of the volatility of the market right now.  Yes, we could see rates drop more, but it is just as likely, if not more likely, to see them increase over the next few months.

Locking in your rate now would insure you get that rate for the term you indicate in your loan.

Call your Loan Officer today to get some of the options for long term locking.  And checkout our mortgage help article if you are thinking about purchasing or refinancing.


As Rates Drop Refinances Rise – August 19th

As Mortgage Rates continue on with record lows refinance activity is increasing dramatically.

According to the Mortgage Bankers Association 81% of new mortgage applications have been for refinance.

This nation has not seen rates like this in over 50 years, and homeowners everywhere are refinancing their mortgage to get locked into these record low mortgage rates.

Will rates keep going down? or should you lock now?

According to the experts this is no time to sit on the fence.  If you are in a position to refinance your home now is the time to get locked in.  Think of it this way.  Not since the 50’s has anyone had a mortgage rate as low as yours is going to be.  So I’d guess that locking now is the best idea.

According to the Mortgage Bankers Association the national average for mortgage rates are as follows…

  • 30-Year Fixed Rate 4.57%
  • 15-Year Fixed Rate 3.95%

If you want to see today’s rates then check out the national mortgage rates.


How to Choose the Right Loan Officer

Are you planning on purchasing a home or refinancing your home soon?  If so then you will need an educated, hard working, competent loan officer.  But how do you find a loan officer with the right qualifications?

Getting the Wrong Loan Officer

First off let me explain to you the headache it can cause if you get a poor loan officer.  You are putting all your eggs into one basket when you pick a loan officer.  If you are using a broker the LO will select a bank, issue the paper work, follow up on conditions and pretty much has a hand in every aspect of the loan.  Not to mention they will have access to all your personal information.  If you use a bank the LO may or may not be as involved, but will have access and most the responsibilities as a broker.

If the LO is slow, a poor communicator, unorganized, doesn’t enjoy what they do, these things will make your experience terrible and frustrating.

I have worked along side some Loan Officers that I wouldn’t even trust to make me a sandwich, so choose wisely.

Where to start?

The absolute best place to start looking for a loan officer is with trusted friends and family.  Referrals are the safest way to go.  If you know someone that has had a bad or good experience talk to them.  If you think you don’t know of anyone that can refer you to someone ask around, you may be surprised.

If referrals from friends and family don’t pan out check with a real estate agent.  A real estate agent does a lot of work with loan officers and typically want to work with the best.  Now you need to be sure the real estate agent isn’t a dud themselves, but otherwise they could be a great source.

Interview

It is okay to ask your prospective loan officer some questions before working with them.  Here are a few questions you could ask…

  • How long have you been a loan officer? – Experience can be a big factor.
  • How many loans are currently in your pipe? – You want to ask this because you want someone who is moderately busy working on your loan.  If you get someone who has 0 or 1 loan in their pipe the danger is that they don’t have enough to keep them busy and may have distractions elsewhere.  Too many loans may mean they are too busy and won’t have time for you.  A good loan officer typically has about 2 -12 loans going.  Within that range is doable.
  • How will you disclose Yield Spread Premium to me? – This is a question that will separate the best from the average.  If you don’t know what yield spread premium is jump over and read our mortgage help post.  Look for a loan officer that will fully disclose the details of the loan and give you a straight answer.
  • What is your origination? – A good loan officer deserves 2% – 2.5% on the loan.  Typically that is divided between 1% on the front (origination) and 1% – 1.5% on the back (yield spread premium).
  • What has been the average amount of days to close your last 10 loans? – Now this could vary greatly because of the many different scenarios and condition of banks which are lending the money.  30 days used to be pretty standard, but 45 days has become more normal.  This is due to more guidelines and regulations that the lenders are requiring.   On normal purchases and refinance it should be in the 25 – 45 day range.  Short sales and other types of loans may take longer.
  • How often will you contact me? – The best answer you could hear is, “How often do you want me to contact you?”
    • Now the big test is asking them to follow up with you once or twice by email and once by phone after the meeting is over.  You have not agreed to anything yet, you just want to see if they will indeed follow up.  Give them precise times to contact you.  Something like, “Can you follow up and email me Tomorrow Morning around 10am, and can you give me a call in 2 days at 3:30pm?”
    • This will test their organization and ability to contact you when you ask.

It is completely okay for you to interview prospective loan officers.  If you had $100,000 to invest you would want someone who knew what they were doing.  Well getting a good loan officer who can get you the best deal can save you thousands and thousands of dollars over the life of your loan.

If you have any tips, stories, or great loan officers in your area please leave us a comment. And if you are from Washington State we recommend Clark Davis from Mortgage Master.