home equity loan Archives

More Homeowners Consider Refinancing

More Homeowners Consider Refinancing

Because of the decrease in mortgage rates to record lows, homeowners’ demand for refinancing has increased across the nation.

According to lenders and mortgage experts, all types of homeowners are attempting to decrease their monthly payments especially with the rates for 30-year mortgages decreasing to less than 4 percent ever since October of the previous year.

Mike Fratantoni, vice president of research for National Mortgage Bankers Association in Washington, D.C., said that nationwide refinance volume is at a three-year high in the past few weeks while mortgage rates stayed at record lows. Fratantoni added that the number one cause for the increase in refinances is interest rates.

Together with months of interest rates at record lows, some of the other factors that push the refinancing boom include the competitive lending market and modifications in a few federal refinancing programs intended for distressed homeowners.

There are advantages in refinancing a mortgage and some of these include reducing the monthly payments, eliminating the uncertainty of an adjustable-rate mortgage by changing it to a fixed rate, opening home equity cash to cover home improvements or college costs, and most importantly, shortening the loan term can result to thousands of savings in terms of interest.

According to John Winters, a wealth adviser at Morgan Stanley Smith Barney, he recommended all his clients to consider refinancing their mortgages, especially those who find it hard to live with little returns on CDs and bonds that have low interest because it can free up monthly income.

When considering refinancing a mortgage, you basically look at how long you think you are going to stay in your present home and whether or not the upfront costs offset the monthly savings. Greg McBride, senior financial analyst at Bankrate.com, said that you are not going to earn back the closing costs if you’re not staying in your home for a year or two.

Fannie Mae, Freddie Mac, and FHA is Profitable Again

Fannie Mae, Freddie Mac, and FHA is Profitable Again

These past few years, politicians, economists and Wall Street became concerned for Fannie Mae, Freddie Mac, and the Federal Housing Administration. They were anxious about the agencies’ respective ability to stay solvent. The three agencies have been getting high default rates for almost five years, which resulted to large quarterly losses.

Recently, those concerns have improved, as Fannie Mae reported $5.1 billion profits for the second quarter and Freddie Mae reported $3 billion profits for the second quarter as well.

Towards the end of the year 2008, the two agencies got $188 billion in taxpayer funds as a form of assistance. As of now, they have paid back a quarter of that, and if profitable quarters continue, they will be able to repay the loan in full.

One of the things that helped the agencies return to profitability is the improving housing market. Another reason can be better risk management of the two agencies.

In addition to Fannie Mae and Freddie Mac, FHA is also rebuilding their reserves and recapitalizing.

Ever since the first months of 2009, FHA has increased its mortgage insurance premiums on four separate instances. New FHA homeowners located in high-cost areas (e.g. Orange County, California and Loudoun County, Virginia) currently pay as high as 1.5 percent every year to the FHA’s capital reserves.

A few things that helped FHA to keep a positive capital ratio and move toward its target 2 percent reserve ratio include bigger premiums and fewer FHA defaults.  At present, the capital ratio of FHA is around 0.50 percent. Moreover, $1 billion of the $25 billion mortgage services settlement went to FHA’s bottom line.

One huge factor that contributed to Fannie Mae, Freddie Mac, and FHA’s return to profitability is the increase in U.S. homeowners staying current on their respective home loans. In other words, decrease in defaults indicates fewer losses and more profit.

Guidelines in a Mortgage Loan Process

Guidelines in a Mortgage Loan Process

In the past few years, the mortgage loan process and procedural policies have been much more rigid, which is clearly brought about by the foreclosure crisis. A borrower’s financial records are thoroughly inspected to make sure the borrower is qualified in terms of credit score and that the procedures for various loan products are followed.

For products such as FHA and VA, the loan approval process involves sourcing the borrower’s funds. This means accounting for the borrower’s cash on hand and where it came from, including money for deposit requirements. For instance, FHA loans ask for at least 3.5 percent of the overall purchase price as a deposit.

While there are a few FHA loan products that do not have this requirement (i.e. purchasing a HUD-owned home), the majority of FHA loan products require at least 3.5 percent down payment.

The down payment can be in terms of “gift funds” from a friend or family member. In either case, affidavits must be signed by the borrower and the benefactor. The affidavits must state that the funds are not a loan, but indeed a gift.

In conjunction with the affidavit, a proof of funds or “gift letter” is also required by the lender from the benefactor. This is typically a bank statement that shows the money was from the benefactor’s account before making the gift and ensures it was not lent by another source. Moreover, the borrower’s bank statement must show a deposit entry for the same amount of the gift.

The borrower must always be aware of the requirements of the loan product that is appropriate for the purchase. Ask the lender to give comprehensive details about every guideline, and make sure to ask questions if there is anything you are not able to understand. More importantly, properly validate the source of your funds so that your transaction will be closed.

Attempt to Resolve Home Loan Rates Begin

Attempt to Resolve Home Loan Rates Begin

According to the most recent figures from the Reserve Bank, the floating rate mortgages is 61.7 percent of the overall mortgage lending by banks for the month of May, which is a decrease from the 63.1 percent during the month of April.

Consequently, it is the first monthly decrease ever since August of the previous year, in which floating rate mortgages was 56.3 percent of the overall mortgage lending. However, the figures during August a year ago was obviously an irregularity given that the floating rate mortgages percentage had been increasing ever since August of the year 2009, where it was 22.8 percent of the whole.

The size of the shift is happening into the one to two-year fixed rates which make up 13.3 percent of the whole during the month of May, an increase from the 11.8 percent during April and 9.6 percent during February. The most popular were pre-GFC, two-year fixed-rate mortgages.

Based on figures from other central banks, the price war has caused mortgage approvals to extensively increase but credit growth has hardly increased.

There was an increase in the household credit growth of 0.2 percent during May for a third consecutive month and a progress of the zero to 0.1 percent growth observed during the last seven months. On the other hand, the growth during May 2007 was 1 percent and 1.1 percent during May 2006.

According to Nick Tuffley, the chief economist of ASB Bank, the credit growth figures are already the net and are being restrained considerably by insurance payouts in Christchurch but the rebuilding is just starting.

The net mortgage lending increased by only 1.5 percent from that of May in the previous year but the $558 million growth during May was significantly higher than the $343 million growth during April.

In addition, Tuffley said that the growth for the month of May is the highest since October 2009. It is estimated that lending will be even stronger for June.

Get a FHA Loan and Get Your Dream Home

Get a FHA Loan and Get Your Dream Home

The federal loan of the government was intended to give citizens the finances they need to get a house despite their low salary and bad credit. Banks would often deny these people‘s request for loan due to the fact that they are unsure if they would be able to pay back loans.

FHA mortgages are one of the government’s ways of helping these potential clients to get loans in financing their everyday necessities. But since the United States had suffered from a recession in 2008, the project was greatly affected and not all of potential clients were able to qualify for the program.

So how does one know if he or she is an eligible candidate for the FHA loan? Well first, let us review why the program was initiated. The Federal Housing Administration is a project headed by the United States Department of Housing and Urban Development. In 1934, the program was initiated to prevent home lenders from being broken due to a home renter’s inability to pay rents on time.

This program allows the government to intervene in the customer lender mortgages if the client goes default in his or her payment. The program has been effective in its function and it now has about 34 million mortgages that it has settled over the 78 years of its existence.

But this started to get harder when 2008 came. The FHA loan was harder to qualify for since the agency had to be stricter to their customers. But now since the economic crisis is finally starting to lift off again, the FHA is starting to approve mortgages again but not all banks are willing to go with the approval even if the individual fulfills the minimum requirement of the agency.

But what are the guidelines that must be comply by the applicants? First, the credit score of the applicant must be at least 580, those who have scores in between 500 and 579 the agency will give a mortgage of 90 percent or lesser of the total price of the house.

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