Yup, it’s happened again. Interest rates have fallen for another week in May. With these record low rates have come a host of refinances. Many consumers understand that now is a great time to look into saving money on your mortgage, but how do you know if you are getting the best deal for you?

Refinancing your mortgage can be a window of opportunity, a life boat, or an investment. If you want to get the best deal for you, it is important to know what you want. The first step in knowing how to get the best deal on a refinance is simply assessing your goals.

Once you know what you want, gather all the information you’ll need to make the best decision. This means knowing your credit score, loan-to-value (LTV) ratio, as well as all the documentation you can muster on your income and debt. The last is especially true if your loan is over 5 years old.

Gathering information is the best start, but it isn’t going to find you the best deal on a refinance. There are several methods of researching refinance options today. Banks can be very helpful, but often they do not offer a broad enough look at rates. One of my favorite new products for assessing your mortgage options is by getting a Mortgage Grade. I like the easy to use platform and straight forward results. Kind of like our lender matching program.

Nance Blog

According to federal data released last week, just about 300,000 Americans have been helped by the government’s loan modification programs to date. While this is a positive step for the program, there are still about 1.4 million homes in danger of foreclosure that qualify for help, but whose owners haven’t applied. Of the over 600,000 who are now in the trial phase of the program, over 275,000 have failed. The result of this is typically seen as a foreclosure or short sale of the home.

In April another trial began, but the number of applicants dropped to nearly one third of the initial trial in September. There are several reasons for this. One is that borrowers who no longer have significant equity in their home feel it is easier to default than to try and find an alternative solution. Another is that there may be more still that gained their loans through fraudulent means and are not willing to come forward. Some borrowers may still be unaware of the existence of the program all together.

For those that have taken full advantage of this program, their payments have been reduced by an average of about $500. The government is also making small adjustments to the trial process which will determine income levels of applicants sooner, helping more of them reach the full modification stage. This will mean less failed applicants even if the number of overall applications doesn’t increase.

When you look at the overall state of the program, I think it is clear that it isn’t working as well as the government has wanted. It is also clear that it works for those who follow through with the process and continue to make their payments. I believe that the borrowers need to examine their options before making important decisions about their home. The numbers show that there are a lot of Americans who could benefit from this program, but only a fraction who have.

Nance Blog

When I talk with others in the mortgage and refinancing world, I often hear this question asked of consumers, “Do you think people really look at the market before making a mortgage decision?” The answer, according to many, is no.

The truth is that over the past 5 years, borrowers have been looking for less than a day (about 5 hours) before deciding on a loan. So, why don’t they put enough time into making one of the largest financial decisions of their lives?

I think the answer lies in the fear factor behind borrowing. Even though we are free to get quotes, ask questions, and get answers, we feel overwhelmed by the whole process and just want to get it over with. The unfortunate result is usually a more expensive mortgage or fewer savings in refinancing.

It’s a fact that a few points on your interest rate or not having to pay for mortgage insurance could save you thousands over the life of your mortgage. The only way you are going to find out what your beset options are is by taking the time to look at all of your options.

Nance Blog

A cash-in refinance is any refinance that requires the borrower to bring cash to the closing, thus lowering the overall loan. The other type, a cash-out refinance, leaves the loan larger with the difference paid to the borrower. Unlike 4 years ago, cash-out refinances are becoming less popular, while cash-in refinances are becoming more popular than ever. The reason for this change is that more Americans are finding a way to take advantage of all-time low interest rates. To do this, many have decided that putting a little extra into their mortgage will mean big savings down the road.

The question that many mortgage holders have asked me lately is, “How do I figure out how much cash I need to put in to get the best rates?” The answer isn’t going to be the same for everyone. The first step is to know where you sit as a borrower. Knowing your loan to value (LTV) and debt to income (DTI) ratios, as well as your credit score, can help you understand what loans are available to you. Using a tool, like MortgageGrade.com, to calculate your mortgage grade is the easiest way I’ve found to compile this information.

If, for instance, your loan on your home is $80,000 and your home is now worth less than $100,000, you are probably looking at mortgage insurance. If you add cash to your loan at the closing, you can bring your LTV ratio down enough to eliminate the need for the insurance, thus lowering your overall rate and saving you money.

Cash-in refinances don’t benefit everyone. If adding cash to lower your loan during a refinance will not lower your interest rate or help you avoid unnecessary payments, there is nothing to gain from it except simply lowering your loan.

Nance Blog

For those that hold a current adjustable rate mortgage (ARM) and are about to hit their reset year, you could be looking at a big rate hike. This means a large increase in your overall monthly payments which nobody likes. When this happens, refinancing is usually a good option. Let’s have a look at some of the possibilities:

- Refinancing to an FRM or fixed rate mortgage is something that everyone should consider these days if they are planning on owning their home long term. Because interest rates are so low, you will be able to reap the benefits of this refinance for years to come.

- Loan modification is another good option. There are many state and federal programs looking to help those who are facing some financial hurdles they may not be able to jump. Your new situation could qualify you for a program that you didn’t qualify for previously.

- Refinancing to another ARM may also be a good way to avoid the large interest rate increase. Doing the refinancing math over the time that you are looking to hold your loan will tell you if this is a smart move.

While today’s interest rates are very low, so are housing prices. Lenders are more cautious now than they were 5 years ago when it comes to home loans. If you are refinancing an older loan, expect some changes to your agreement as well as higher standards to qualify for the best interest rates. If you have questions about choosing the right mortgage in today’s market, I recommend you speak with our resident Mortgage Professor, Jack Guttentag.

Nance Blog

Earlier this year the Federal Home Financing Agency (FHFA) extended a vital refinancing program known as the Home Affordable Refinance Program or HARP, to 2011. Since this aspect of the Obama Administration’s effort to help the housing market recover isn’t going anywhere, I thought it would be a good idea to spend some time looking at it more closely.

As a part of the Making Homes Affordable Program, HARP serves those who are current on their mortgages, not those behind on their monthly payments. Currently it looks to aid those mortgage holders with a loan to value (LTV) ratio on their current mortgage of 80% or higher, to a maximum of 125%. Because of these high numbers, most of these borrowers have trouble refinancing, even though they are not behind on their current mortgage payments.

According to Freddie and Fannie, almost 200,000 of the 4 million mortgages refinanced last year were HARP refinances. With $1.5 billion also being added to trouble housing markets around the country this year, I expect those numbers will increase in 2010. The question is by how much and will it be enough to stall the still high number of foreclosures still occurring today?

Freddie Mac titles their version of HARP as a “Freddie Mac Relief Refinance Mortgage” and Fannie Mae provides two “Refi Plus” options for current mortgage holders with high LTV ratios. This means that if you are making your monthly payments, but have little or no equity in your home, HARP can help. But it isn’t going to find you.

Nance Blog

As we look across the nation this past quarter, we see housing prices drop by less than 1%. The steadiness of the market is off set on both sides by areas doing very well or very poor. The West and Midwest saw the steepest overall declines, and the Northeast saw the largest overall gains. In the South, an overall gain of about 1% is a positive sign for the southern states. For home owners, you can expect prices to increase as the summer progresses. Let’s have a look at some of the major bright spots.

In Florida, Venice and Sarasota saw positive numbers for the first quarter in what has seemed like forever. In California, places like the Los Angeles and San Bernardino areas both went from negatives to positives in 2010. These improvements in these major housing markets of hard hit states like Florida and California show us that house prices nationwide are ready to increase.

Though cities like Las Vegas and Orlando are still way behind with -11% and -15% respectively, these reports show improvement over the last several quarters. It is obvious that it won’t take long before even these markets close in on national averages.

While some of the credit must be given to the ending of the government tax credit in April, I believe these numbers add up to increasing housing prices. For those that are still looking to buy, the overall decline of -0.7% should let you know that your time is now.

Nance Blog

With interest rates holding at low levels and housing prices still falling, refinancing seems like a good idea to some. Others however, have decided that a refinance isn’t in their stars, or just don’t think they can get anything out of the process. Let’s have a look at some of the myths about a refinance:

- Refinancing is only for troubled borrowers. - It doesn’t matter whether you are delinquent on your  mortgage or overpaying, refinancing is something every mortgage holder should be looking at. There’s always a chance it could save you money in the long run.

- I already refinanced, don’t I have to wait? - There is a popular myth out there that you must wait a year before you can refinance again. This is not true.

- Closing costs mean lenders win in a refinance. - This is another common myth. Yes, closing costs are associated with any loan or refinance, but that doesn’t mean that refinancing can’t save you money. Only by going over all the numbers including your new monthly payment and the time that you will be making that payment will you be able to truly see if a refinance can help you. I know it helped me when I needed it.

Our resident Mortgage Professor, Jack Guttentag, also talks about some valid and invalid reasons for not refinancing. Knowing what myth shouldn’t deter you from thinking about a refinance is an important part of deciding whether it is right for you. If you are still unsure about looking into a refinance, try asking him your question. You might just get the answer you’re looking for.

Nance Blog

The mortgage rates have stalled over the past week at the lowest levels so far for this year. The trend, attributed to the debt crisis in Greece and other Mediterranean countries, has made one thing clear for anyone looking for a home loan: Get a rate lock.

World events cannot hold the market at bay. Even the end of the tax credit will not stop the eventual up turn of the American housing market. The best way to take advantage of these rates is by locking them in with your lender. Even if you don’t plan to close for several weeks, you may not like the numbers you see by the end of May.

It’s true that not everyone is going to be able to take advantage of the regular 30 day rate lock. What if, for instance, the home is being built and won’t be ready until July? There are also any number of financial reasons why you might have to wait to close on your loan or refinance.

The good news is that there are long term rate locks out there as well. Lenders will, for a price, offer a rate lock that lasts two months. Though it may not be the best option for you, those that can take advantage of this type of rate lock would be encouraged to do so. I don’t expect we will see rates as low as we have last week for the rest of the summer.

Nance Blog

To be underwater in your mortgage is to have more in loans that the value of your home. This is the unfortunate circumstance that many Americans have found themselves in when the housing market fell. Today the number of mortgages with negative equity sits at just under a quarter of all mortgages. Many had to foreclose on their mortgage, while others escaped through refinancing and government programs. There are also those who are waiting out the storm with hopes that house values will return to regular levels and they can either stay unchanged or make a profit from their initial investment.

The unfortunate truth is that we may not see prices as high as we did 5 years ago for a long time. In New York for example reports show that it may be 7 years before the market recovers. In Detroit that timeline increases to almost 10 years. For those that want to wait out the storm, it could be a long haul, though you might find relief in refinancing.

New government programs are slowly being picked up by lenders around the country. Re-evaluating your ability to get a refinance, even if you have an LTV ratio of over 100%, is a good idea. In New York, the Loan Value Group is offering adjustments and even cash back to faithful borrowers who are now underwater. These types of programs however, are not going to find you. It’s up to every consumer to stay informed and ask the right questions. If you have an underwater mortgage, you might start by checking into your ability to refinance. You might be surprised at what you find.

Nance Blog