Why is it Time to Refinance? Is it the best time to get a Mortgage Refinance?

Interest rates on mortgages have continuously declined to reach its lowest level in recorded history. This is a strong proof that it is already the best time for homeowners to consider refinancing in order to generate some savings.

The rate for a 30-year fixed mortgage was at an average of 4.39% during the end of the Aug 4 week. Similarly, the rate for a 15 year fixed mortgage decreased to 3.54% despite the reduction in bond yields and signs that show a weaker economic standing than what is expected said the Primary Mortgage Market Survey of Freddie Mac.

The president of Metropolitan Boston Real Estate, Nebury Street brokerage, said that this is good news because this will serve as a motivation for anyone who is considering refinancing knowing that the low rates won’t stay very long.

Here are the possible savings that homeowners can generate: for a mortgage of $250,000 with 5% interest, they could save about $160 monthly and $2,020 yearly if they refinance the loan for 4.39%. These savings provide a guaranteed cash in the bank during these present times when traditional savings account have nearly zero percent in returns and the gyrations in the stock market have exhausted the investment accounts.

Bankrate.com’s senior financial analyst Greg McBride said that anybody who decides to refinance at these very low rates are sure beneficiaries of the economic concerns and Wall Street challenges.
The three lenders listed in Bankrate.com that offers 30 year fixed loans with less than 4.39% interest are AimLoan.com at 4.19%, Loan Depot at 4.25% and American Interbanc.com at 4.35%. All three are offered with zero points.

Albano said that even if the low rates are great news for most mortgage owners who pass the requirements of credit and equity to qualify for refinancing, potential buyers will still not leave the sidelines. He thinks that people who are observing the rates and decides that they are not ready to purchase at 4.5% will change their mind when the rates fall at 4.3%.

If you are looking to refinance your mortgage, then you may want to consider doing it soon. As you may know, last Friday, Standard and Poor’s downgraded US treasuries from AAA to AA+. This is the first time in history that the U.S. has had a downgrade.

Then, on Monday, Standard and Poors also downgraded Fannie Mae and Freddie Mac. While it is unclear as to the final effects of the downgrade, many financial experts are prediciting that the cost of money will go up, effectively raising interest rates.

If this happens, it could be problematic for an already sluggish economy,a nd could further depress the already lagging housing market. Higher interest rates would effectively make home ownership more expensive.

As for those with bad credit or poor credit, these changes could put you completely out of the market. While the agencies push to regain their credit ratings, they may be forced to be even more conservative with lending practices, and that would make credit or loans for people with bad credit almost out of reach.

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Related articles

• US debt downgrade could mean rate hikes for all (seattletimes.nwsource.com)
• S&P Downgrade Could Feed Home Buyer ‘Anxiety’ (blogs.wsj.com)
• Economy sends mortgage rates down to new 2011 lows (hsh.com)

Loans for people with debt obligation

One of the questions that is often asked is whether or not you can get loans for people with debt obligations. And the answer to that question is.. of course.

What a debt obligation really is, is a promise to pay back money that was borrowed. So, you credit card balance is a debt obligation. Your car loan is a debt obligation. Even you mortgage payments are debt obligations.

The real key to understanding debt and debt obligations are your income to expenses. The more income you have, the more debt you can take on. Conversely, the more expenses you have, the less debt you can take on.

The way this is expressed is or measured in the finance industry it called the debt to income ratio. Simply put, this means how much debt you have compared to your income.

For many years, it was seen that you should no more than 28-36% of your gross income that goes to debt. That means, that you can’t have debt payments over 30%. Someone making 100,000 a year should have no more than 30,000 going to debt payments.

Because of the current financial situation we are in in the United States, that number may actually be lower now. Banks and credit institutions are all working to be much more conservative these days and are making borrowing much harder.

So, back to the original question of “Can I get loans for people with debt obligation?” The answer is that it depends on your current debt to income ratio and your credit score.

If your debt is under 30% and you have good credit, then it is very likely that you can get more loans.

One thing to keep in mind. If you have large lines of credit, it may be more difficult to get additional loans. The reason for this is your lender may consider the possibility that you could run up balances on all the lines that are open, and then not be able to pay.

So, while having large credit lines is an idication of a persons ability to manage debt, it can also work against you if you have too many open balances and available credit.

Some people have consolidated all their loans into one. This is often done with a home mortgage refinance. This way, all balances can be comvined, and, in many cases today, the monthly payment can be lowered. Just a few years ago, it was not uncommon for someone to have a 8-9% interest rate on their mortgage. But just last week, new mortgage rates were released and you can see rates in the low 4% range. These are the lowest rates that have been seen since mortgage rates were tracked by Fannie Mae…

Now, to the other possible down side. As of Today, Aug 8, Standard and Poors just downgraded Fannie Mae and Freddie Mac’s credit worthiness. While the stock markets have reacted negatively to this, it is still unkonwn as to what will happen to interest rates in the near future.

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US Credit Rating downgrade by Standard and Poors

Standard and Poors actually did downgrade the US credit rating from AAA to AA+. They had informed the White House at about 2pm on Friday.

The White House checked the numbers that the credit rating downgrade was basedon, and they found a 2 Trillion dollar error. They pointed this out to the S&P, however, the debt rating agency did not revise their rating.

The reason they did not change the rating was because they pointed to the internal issues that the US Government has with it’s inability to balance the budget.

They pointed to the fact that without fiscal responsibility and a good financial plan for the US, it is only a matter of time before the Government defaults on its fincancial obligations.

So, what does this all mean?

Well, first of all, the effect of a lower credit rating is very much the same as an individual.

When your credit is less than stellar, you have to pay more for loans. As such, it is possible that it will cost the US more to borrow to finance our deficit.

That will make things more expensive, and it may quite possibly end up making things more expensive for everyone.

Things like Mortgage loans, car loans, lines of credit, will all now carry a higher interest rate.

The other concern is that the credit downgrade will push the economy back into recession.

On the international front, Asia countries who own most fo the US bonds are upset. They are concerned about a devaluation of the US debt that they carry.

The other question is, what about the US treasuries being the most secure? and What should people park their money in?

Even though the debt rating was downgraded, US Treasuries are still the most secure form of security. There is no better or safer option.

The US and the world stage is waiting to see what effect the credit downgrade will have on Wall Street on Monday.

Scammers advertising loans with advance fees seek out people who are in great need of money. They promote their products and services in local print materials and legit looking websites online. They entice people to grab their offer by using words like “guaranteed” and phrases such as “easy credit.”

Oftentimes, websites offering advance fee loans asks their applicants to fill out an application form that requires personal information such as social security and bank account numbers. Then, the applicants are victimized when they are informed that their loan is approved but need to pay an advance fee amounting to several thousands of dollars before they get it. After they make the payment, they never get the loan they were promised or they are even asked to pay more.

In order to avoid these scammers, the Better Business Bureau warns individuals seeking for loans to be wary of the following lenders:

1. Lenders who request upfront fees. Fees may be required by a lender but not prior to completing the loan application. Be cautious once you are asked to send money through wire transfer or money order.

2. Lenders who do not give their contact information. You must always ask for a physical address of their office and their phone numbers. If they cannot provide you with any of these, it may be a sign that they are trying to avoid law enforcement.

3. Lenders who commit to provide a loan despite of the applicant’s credit history. Lenders operating legally will usually not guarantee approval before application most especially if the applicant has poor credit rating.

4. Lenders that do not operate within the U.S. Most of these lenders use fake U.S addresses or P.O boxes.

5. Lenders who pressure their applicants to take immediate action. Scamming lenders will ask you to rush in making a payment to them and sending your information before serving any paperwork. Make sure to check the company’s background before providing any information. As much as possible obtain a written contract of your loan.

6. Lenders who use names that sounds like other legit companies. They do this to confuse you and tempt you to obtain their products and services.

It is tempting to obtain advance fee loans especially when you are in need of money. However, be cautious and think about it deeply. You can check with the attorney general’s office to find out if the lenders are registered. You may also check if they are legal through the BBB.

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Increase in US Consumer Spending

Consumer borrowing in the United States had its highest increase in three years during the month of July. At the top of the list is the rise in non-revolving credit which consists of student loans.

According to the Federal Reserve, the increase in credit amounts to $12 billion after an amended rise of $11.3 billion in the month of June. In a Bloomberg news survey, economists predict a gain of $6 billion. The growth in the number of non-revolving loans was the highest since the month of November back in 2001.

There is a huge decline in revolving credit. This shows that Americans may not be purchasing non-essential materials because of the lack of consumer confidence as the rate of employment stays low and income growth continuously declines. Increase in job availability and income may be needed to push household spending as well as recovery.

The gain in July was the highest since April of 2008 according to the figures of the Fed. The approximation of 32 economists in the Bloomberg survey stated that the gains will be at $1 billion to $17 billion after reporting a previous increase to $15.5 billion in June. The report of the Fed does not include debts taken by real estate which comprise of lines of credit for residential mortgages and home equity.

Economic Outlook
Chief Rupkey, Bank of Tokyo-Mitsubishi UFJ Ltd.’s chief financial economist said that the consumer is trapped in the middle of a hard position which is not beneficial for the economic outlook. The total credit increase showed a non-seasonally adjusted rise of to $385.7 billion from $15.6 billion in the borrowing category of the federal government including school loans. The unadjusted figures also reflected minimal increases in non-revolving borrowing at finance companies, commercial banks and credit unions which may show an improvement in vehicle sales in this month.

Americans increased car purchasing in July. The sales in vehicles rose to 12.2 million yearly for that month from 11.41 million according to the data of the industry.

In the economic survey of the Fed’s Beige Book, the economy is growing at a slower pace in several regions because shoppers are limiting their spending and factories are restricting production.