How soon can I get rid of my Mortgage Insurance?

For our long-time readers, you are aware that the rules in the mortgage and real estate industry are always changing.  Many of the policies and guidelines that were applied several years ago – or even several months ago – have now changed… and will continue to change.  This is the case with regards to the rules dictating the removal of monthly Mortgage Insurance.  The current guidelines are below: Read the rest of this entry »

You are allowed to bring cash to the table when you refinance.

When you owe more on your home than what it’s worth, most people feel like they have very few options.  However, one alternative that most homeowners never consider is to actually bring cash to closing.  Though this may not be the most attractive choice, it’s one that could save you thousands interest over the life of your loan.

How much cash will I need?

Here’s an example of a real client:

• Amount Owed:  $210,000
• Value of Home:  $200,000
• Max Loan Amount:  $190,000
• Cash needed at closing:  $20,000 ($210,000-$190,000)

Though the amount of cash that you would need to bring will vary with every situation, it can often be worth it if you can get lower your interest rate significantly.

What are the benefits?

We were able lower this client’s monthly payment by about $660.00 per month.  This meant that in 31 months they would have saved enough to recoup the $20,000 needed at closing.  Since they were planning on living in their current home indefinitely, this particular loan scenario made sense for them.

Where will I get the cash?

In the meantime, I know what you’re thinking… “Where am I supposed to come up with $20,000?”  Again, keep in mind that these types of scenarios only make sense if three things are in play:

1. The new loan must have a significant financial benefit
2. You plan on living in the home long enough to “break even” on your costs
3. You must have access to the necessary cash

Personal loans from family and friends don’t always go as planned, so let’s leave that option as a last resort.  But let me ask you this, do you have a 401(k) or similar retirement account?  In many cases, you are able to take out a personal loan without having to pay taxes or penalties.  You can then use the monthly loan savings to aggressively pay back the personal loan.

As they say, there is more than one way to skin a cat, and there is absolutely no one-size-fits-all mortgage solution.  Since everyone situation is different, please give us a call so we can give you specific council that pertains directly to you.

FHA refinances allow you to borrow more!

Since the Federal Housing Administration (FHA) is subsidized by the U.S. taxpayers, they are willing to take on certain risks that private lender may not.  The traditional FHA 203(b) mortgage has two main advantages over most conventional loans:

• On a Rate/Term Refinance your Loan-to-Value (LTV) is allowed to be as high as 97.75%.  Most lenders will not exceed 95%.
• FHA currently has no limit on the Combined Loan-to-Value (CLTV), which means, if you have a first and a second mortgage, you can refinance the first with FHA and re-subordinate the second, regardless of CLTV.  Most conventional lenders will have much stricter guidelines. 

So, if you currently have a first and a second mortgage, and combined you owe more on your home than what it’s worth, FHA will allow you to refinance your first mortgage as long as the second mortgage remains in second lien position.  Keep in mind that is “market driven”.  If the current second mortgage does not agree to stay in second lien position – behind the new FHA mortgage – then you won’t be able to close on your new loan.

Streamline your refinance with a new FHA mortgage… without an appraisal!

The options you have in life are often determined by your current circumstances today.  When you owe more on your home than what it’s worth, the first question we need to sort out is, “What type of mortgage do you currently have?”  If the answer is, “FHA,” you’re in luck!!

If you currently have a mortgage through the Federal Housing Administration (FHA), you may be eligible for an FHA Streamline Refinance.  The best part about this program is that you can take advantage of lower interest rates even if you owe more on your home than what it’s worth.  So here are the basics:

• Existing mortgage must already be insured by FHA
• You must be current on your FHA mortgage
• Mortgage amount is limited to the remaining principal balance + finance mortgage insurance

With today’s low interest rate environment, lenders are often able to pay for all of your closing costs by giving you a slightly higher rate.

When you owe more on your home than what it’s worth.  FHA provides a great solution to lowing your payments.

VA Interest Rate Reduction Refinance Loan (IRRRL)

The VA IRRRL is often referred to as a VA Streamline Refinance.  Here’s how it works.  If you’re a military veteran and you currently have a VA Mortgage and you simply want to do a “rate and term” refinance – basically, you don’t need to take cash out or consolidated any debts – you may be eligible for the VA IRRRL.  Here are some of the benefits:

• No Credit or Underwriting Requirements!  You must have a history of on-time mortgage payments.
• NO APPRAISAL!  So even if you’ve lost equity in your home, it won’t impact your approval.
• Closing Costs May be Rolled in!

Remember, VA loans never have monthly mortgage insurance.  The VA IRRRL is a great way to take advantage of lower rates even if you owe more on your home than what it’s worth.

If you’re a military veteran and would like some additional advice regarding your home mortgage, please don’t hesitate to give us a call.  We look forward to serving you.

Ben Olson, 763-416-2620

“Mortgage Rates at New Lows, Thanks to Europe’s Debt Crisis.”

Well, that’s the headline from today’s CNBC.com article, “Mortgage Rates at New Lows…”  Now I may be called an eternal optimist, but the truth is, when the stock market takes a beating it often results in lower interest rates.  And, with lower interest rates it makes housing more affordable.  But, in the words of Reading Rainbow’s LeVar Burton, “you don’t have to take my word for it.”

“It’s the best time in our generation to buy,” says Mark Zandi, chief economist at Moody’s. “It may be the best time in any generation. Mortgage rates are so low and with homes prices down and lots of inventory, you couldn’t pick a better time to buy or re-finance.”

As the rules continue to change in the mortgage and real estate industries, proceed with caution.  Make sure you’re working with a seasoned Realtor® and Mortgage Loan Officer, because what you qualify for today may not be what you qualify for in a month or two.

Fannie or Freddie?  That is the question.

Most home owners are unaware that there is a technical difference between who services your mortgage and who owns your mortgage.

The mortgage servicer is the company that you write your mortgage payment to every month.  Mortgage servicing is its own unique business, and it’s not uncommon for the servicer of your loan to change over time.

The mortgage owner is the entity that actually owns your loan.  In many cases in the United States, the answer to, “Who owns my loan?” is often (but not always) Fannie Mae or Freddie Mac.

If your mortgage is owned by Fannie Mae or Freddie Mac you may be eligible for the Home Affordable Refinance Program (HARP), which can allow you to take advantage of low interest rates – WITHOUT Mortgage Insurance – even if you owe more on your home than what it’s worth.  The first step to determine eligibility is to find out who owns your loan.

Fannie Mae Loan Lookup

• 1-800-7FANNIE (1-800-732-6643)
• www.fanniemae.com/loanlookup

Freddie Mac Loan Lookup

• 1-800-FREDDIE (1-800-373-3343)
• www.freddiemac.com/mymortgage

Home Affordable Refinance Program (HARP)

The Making Home Affordable program announced by President Obama and the U.S. Department of Treasury on March 4, 2009 includes a new initiative, the Home Affordable Refinance Program (HARP).  The Home Affordable Refinance Program provides refinance opportunities to borrowers with mortgages owned by Fannie Mae or Freddie Mac.  This Financial Stability Plan may allow you to refinance up to 105% of your home’s value AND without Mortgage Insurance.  This is a great way to take advantage of today’s low interest rates, even if you owe more on your home than what it’s worth.

Are you eligible for HARP?

• Are you the owner of a primary residence, second home or investment property?
• Are you current on your mortgage payments?
• Have you been denied a refinance in the past because of your declining home value?

If you answered YES to any of these questions, you may be eligible!  This program is available for your primary residence, your second home or even your investment properties!

Click Here to learn how to find out if your mortgage is owned my Fannie Mae or Freddie Mac.

“I’m upside-down with my mortgage.  What do I do?  What are my options?”

We have these converstaions with our clients nearly every day in our office.  In the posts to come, we will lay out the nine most common solutions to this situation.  But first, you need to ask yourself a few questions: Read the rest of this entry »