Posts Tagged ‘Mortgage Interest Rates’

FHA Streamline Refinance

July 30th, 2010

If you currently have an FHA Mortgage on your home, you may qualify to save hundreds of dollars on your monthly mortgage payments.  As with the Fannie Mae and Freddie Mac programs that we have been talking about for the last few months, you may not have to have an appraisal.  In addition, this program does not have any debt to income ratio requirements.  As long as you have not had any late payments on your mortgage (more than 30 days) in the last 12 months, you may very well qualify for an FHA Streamline Refinance.

The biggest differences within this program are determined by whether or not an appraisal is done.  If you are like me, the first question that comes to mind is, “If it is not required, why would you do an appraisal?”  If you decide NOT to do a new appraisal, the new refinanced loan cannot add any of your closing costs to the new loan balance (except odd days interest).  That means that you would either have to have your closing costs covered by the lenders wholesale credit or you would have to bring money to closing.  This option is actually a great value for many borrowers.  Particularly if you feel that your home’s value has declined since you took out your last mortgage.  Rates are so good right now too that you could probably get a rate in the 4% without having to bring more than one month’s payment to the closing table.  If you choose to get a new appraisal during the loan process, you will be allowed to roll any necessary closing costs into the loans so you can maybe get a lower rate without the out of pocket expense.

The other thing to remember with FHA mortgages is the up front mortgage insurance premium.  This is the amount collected by FHA upfront and is usually rolled into the new loan. (Please note that if you choose to use the no appraisal options, this is not a cost that can be rolled in.)  The good news is that on an FHA Streamlined refinance, you will get a portion of your existing upfront mortgage insurance credited back to you.  If you have had your FHA mortgage for a short period of time, the percentage of your credit will be high and the opposite is true too.

Rates are REALLY good right now.  If you have been thinking of refinancing your current home or buying a new one, now is the time.  Let The Kunselman Team find the right mortgage to fit your needs!

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What Are Rates Going to Do This Year?

January 21st, 2010

Interest rates for mortgages over the last 6 months have been amazing.  Most borrowers have been able to get rates in the low 5% without paying any points or high 4% if they wanted to pay some points.  There is a lot of speculation in the market right now about what is going to happen with rates.  There are really only two arguments, rates are going to go up or rates are going to stay the same.  Here is the basis of both of these arguments.

Rates are going to go up:
Rates have been kept artificially low over the last year.  The government has been investing billions if not trillions of dollars into the purchase of mortgage backed securities.  The government has only committed to buying mortgage backed securities through the end of the first quarter of 2010.  This news raised a lot of chaos in the market toward the end of last year.  Rates stepped up about a half of a percent on this news.  The government cannot continue to keep purchasing more and more of these securities.  If they do, the value of the dollar will continue to go down as well as the risk of another housing bubble.

Rates are going to stay the same:
The government has spent the better part of two years attempting to stabilize the housing market.  The most successful aspect of this effort has been the purchasing of mortgage backed securities to keep interest rates low.  If the government stops buying these mortgage backed securities, who will be there to buy them?  The market has not shown a strong appetite for these securities since they first crashed a few years ago.  The only reason that banks are still writing new mortgages is because there is someone buying them on the secondary market.  If the secondary markets disappears, the banks will all but shut down the market.  The government showed the big banks that they would not let them fail and the banks know they hold all the cards.  Until a new investor shows up in the secondary market, that wants to buy mortgage backed securities, the US Government is going to be obligated to keep buying them.  Failure to do so would result in another crash of the housing market.

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What is Yield Spread Premium and Why is it Beneficial?

September 28th, 2009

Today’s “Know Your Mortgage” article is going to cover Yield Spread Premium or YSP. This is becoming a hot topic in the news right now because the Federal Reserve has purposed a new rule that would make it illegal for banks to pay yield spread to any loan originator. This rule, if passed will have a very detrimental impact on your ability to get a new mortgage. So in that light, I thought it would be good to explain what YSP is and how it facilitates mortgage lending.

Yield Spread Premium is money that is paid to a mortgage broker, by the bank, for originating the mortgage. The dollar amount (of the Yield Spread Premium) paid by the bank is determined by the rate of the new loan. The third and forth component of the pricing of a new mortgage is the origination and discount points. Both of these are costs paid by the consumer. It is the relationship between all four components that make up the majority of costs of a new mortgage. If you are paying discount points, the broker is not receiving any yield spread. If you are not paying any origination points, the broker is getting paid in Yield Spread Premium. Some of the benefits of Yield Spread Premium are:

 YSP allows the consumer to use other sources besides banks to get a mortgage done.
 YSP allows for lower closing costs because that lender is paying a portion of the closing costs.
 YSP allows for better flexibility on rates.
 YSP paid to mortgage brokers allows you the consumer to see how much money is being paid on your mortgage.

Yield Spread Premium allows for more consumer options by allowing non-bank companies to originate mortgages for the consumer. The largest collections of these companies are mortgage bankers and brokers. In fact, it’s very likely that many of you reading this today got your mortgage through one of these sources. Some of the ways that mortgage brokers and bankers help facilitate the mortgage process is by offering more programs, better rates and fees, and probably a shorter time frame. In addition, because most mortgage brokers are paid strictly commission, they will work harder for that business because they don’t get paid unless they get you into a loan that works for you.

Yield Spread Premium has also allowed for consumers to have lower closing costs and more flexibility on rates. When a loan originator works for a bank, they have very stringent pricing guidelines to follow. A mortgage broker on the other hand has the option of looking around with multiple lenders to see which one has the best pricing.

The other benefit that Yield Spread Premium brings to the table is that the consumer gets to know what is being made on their new mortgage. When you are working with a mortgage broker, Yield Spread Premium must be disclosed from the beginning of the loan process now in addition to on the final settlement statement. What that means is that you the consumer see from start to finish, what a mortgage broker is making on a new mortgage. Banks also have a yield spread premium but they are not required to ever disclose. This does not mean that money isn’t there. It just doesn’t have to be disclosed.

The Fed’s argument against YSP is that it gives incentive for brokers to give their clients worse loan programs because of their own personal gain. And even though, law requires full disclosure about the Yield Spread Premium, the Fed believes that the American consumer is not smart enough to protect itself so YSP must be eliminated. The reality is that many consumers “shop” around when looking for a new mortgage or they work with someone they know and trust. If you have had a bad experience in the past with a mortgage broker, odds are you either didn’t “shop” around or were not working with someone you trusted. If you don’t know any good mortgage brokers, ask a friend. If you don’t have any friends, check out your local real estate association. Any of these sources should be able to provide you with a list of reputable mortgage brokers.

To read more about the new Federal Reserve Board Ruling Regulation Z – Truth in Lending – Closed-end Mortgages [R-1366] check out http://www.federalreserve.gov/newsevents/press/bcreg/20090723a.htm. The purposed rule is currently in its public comment period, so please leave comments!

We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.

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Interest Rate vs. APR

September 24th, 2009

Today, The Kunselman Team is going to explain a sometimes confusing part of the mortgage process.  The differences between the interest rate and the Annual Percentage Rate (APR) can raise some questions that can be difficult to explain.

Most everyone understands what their interest rate is.  It is the rate of interest that they will be charged for the money they borrow.  It is also used to calculate your monthly payment.  Annual Percentage Rate or APR even though is sounds similar can be quite different.

APR is a calculation of the annual cost on a loan over the full term of the loan and it is found on the Truth in Lending Disclosure (TIL).  The APR not only factors in the monthly interest cost, but the upfront costs of the loan too.    The idea behind the APR is that if you are trying to compare two or more loans, this APR should give you a better idea of which is the better program from a strict numbers perspective.  Let’s look at two example loans. One has an interest rate of 6.00% and an APR of 6.50%.  The other loan has an interest rate of 5.75% and an APR of 6.75%.  Strictly on a cost perspective, loan number one is the better choice because it’s APR is 6.50% compared to the seconds loans APR of 6.75%.  The reason behind this difference is in the fees that the brokers are charging on the two loans.

Something to keep in mind also is that the new Mortgage Disclosure Improvement Act requires that if the initial APR that a lender disclosed to you changes by more that .125% by the end of the transaction, you the borrower must be notified and given three business days to review the new figures.  It is not uncommon that there could be a slight change in the APR because legitimate fees do come up during the loan process.  If there is a large change, it would be wise to sit down with your mortgage broker and get clarification on why there was such a large change.

We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.

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Just don’t fall for it?

September 24th, 2009

We have all heard the saying, “If it sounds too good to be true, it probably is”, yet we have all fallen for someone who promised us the world and only delivered us disappointment. In the last month or so, we at The Kunselman Team have started to hear a lot of stories about people who were promised great things from some mortgage broker that they didn’t really know and surprise surprise, the broker did not deliver on their promise.  This is not that uncommon in this market because many mortgage brokers are desperate for business and will tell people anything to get a loan.   We had a client call us last week because they had decided to work with a broker who promised to close their loan in two weeks when we said it would take about 30 days.  The loan didn’t close in two weeks and it still hasn’t closed.

The Kunselman Team has a much better philosophy.  We believe in under promising and over delivering.  While many brokers will leave 3rd party fees of their Good Faith Estimates to make it look like they are charging less, The Kunselman Team puts every fee that can come up so that there are no surprises except maybe that your are getting back more money than expected.  We are also realistic about the time it will take to close your loan.  Loans just take longer to do now than they did in the past.  Lenders are looking at every detail much more closely than they have in the past and that takes time.  If you are working with someone who promises to close your loan in two weeks, get it in writing and make sure you get something if they don’t deliver on their promise.

As always, if you would like to work with the best in the industry, give The Kunselman Team a call so we can help you with all your mortgage needs.

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What Can the Stimulus Package Do for Me?

September 24th, 2009

Every day when you turn on the TV you are bound to hear someone talking about the “Stimulus Package” and how it supposed to help home owners buy homes or refinance their existing mortgages but few people explain how this applies to the average person in terms everyone can understand.  Today I want to talk about two specific programs, the “First Time Home Buyers Tax Credit” and the DU Refinance+.  These are two of the better parts of the “Stimulus Package” and I would like to explain how these could help you or someone else you know, like and trust.

The “First Time Home Buyers Tax Credit” in very simple terms is a rebate you get from the government for buying a home.  Now this rebate does come with a few restrictions.   First, you must be a “First Time Home Buyer”.  That means you cannot have owned a property in the last 3 years, so just because you may have owned a home in the past doesn’t mean you can’t qualify for this credit.  Second, if you purchase a home for $80K or more you will get the full tax credit of $8,000; if you purchase a home for less than $80K, you will receive 10% of the purchase price in a tax credit.  In addition to the previous two restrictions there are some income restriction that you will want to talk to you tax advisor about.  But here is the beauty part of this tax credit too.  The tax credit is real money in your pocket.  This is not one of those programs where they will reduce your taxable income by $8,000 so you pay fewer taxes.  If you are scheduled to get a refund of $500 on your taxes, you will get a refund of $8,500 instead.  Now since most of you have probably already filed you 2008 tax returns you have two options when to collect this credit.  You can wait until you file you 2009 tax returns and you will get it then or you can amend your 2008 tax returns and get it this year.

If you have been considering buying a home, now is the perfect time.  Longmont’s real estate market has been stabilizing well and the state as a whole has actually seen its first decrease in foreclosures since they started monitoring them back in 2003.  But you cannot wait forever.  If you want to qualify for the “First Time Home Buyers Tax Credit” you must purchase a home before December 1st, 2009.

The DU Refinance+ program is designed for those who currently own a home and would like to refinance to a low interest rate but might not be able to because their property values have declined.  There are a lot of restrictions to this program so I will cover some of the big ones but each loan is looked at case by case.  First, to qualify for this program, your current first mortgage must have Fannie Mae as its servicer.  The easiest way to find out if your mortgage is owned by Fannie Mae is to call The Kunselman Team and we can look it up for you.  (Please note that even though you don’t make your mortgage payments to Fannie Mae, that doesn’t mean your loan is not owned by them.)  If Fannie Mae owns your mortgage, the second question is “Does your first mortgage currently or in the past had mortgage insurance on it?”  If the mortgage had mortgage insurance on it at any point, you do not qualify, but if your first mortgage is 80% of you homes value or less you may qualify.

This program is particularly helpful for those who have a first and second mortgage on their home.  Many people with first and second mortgage currently owe more than their home is worth.  By current lending standards, these people would not qualify for a refinance but with the DU Refinance+ Program, as long as their first mortgage is not more than 105% of their homes value, they may be able to qualify for this refinance to lower their monthly payments.  This is not a cash out refinance!  You can only refinance your existing mortgage and the loan closing costs.  If you have a second mortgage, that company must agree to the terms of the new loan but since we are usually bettering your situation, many are being pretty cooperative.

If you or someone you know, like and trust would like to see he or she qualifies for either of these fantastic programs, please contact Luke at Luke@TheKunselmanTeam.com or Shelley at Shelley@TheKunselmanTeam.com.

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