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Answers to all of your mortgage questions

 

It appears that fixed mortgage rates are moving up, is there any chance we will see a rebound with interest rates this year?

The benchmark thirty year fixed mortgage is at its highest rate of the year. Mortgage rates have moved up aggressively as fears of inflation are having a ripple effect on both the stock and bond markets. The past three years interest rates have moved up heading into the summer months and have dropped in the fall. Their is no guarantee interest rates will drop anytime soon, especially near levels the market experienced in early January. The market will continue to digest the financial reports and keep a close eye on inflation. If rates do come down it may be for only a short period of time, so it would make sense to get locked into a fixed rate home loan today if you are concerned that the best of the market is now in the past.

Could the fed raise rates this year?

Yes, there is a growing suspicion that the fed has finished with their interest rate cuts and could potentially look towards raising the fed funds rate in the fall of 2008. The fed is concerned with inflation and helping to restore the falling dollar and faces continued pressure from rapidly rising oil prices. The credit crunch was the main catalyst to the fed's rate cuts and this appears to be all but over.

The ten year bond is down, but mortgage rates are up, how is this possible?

This condition in the marketplace is the direct result of mortgage bonds increasingly carrying a lower value with investors. Both the ten year bond and mortgage security bond are investment grade bonds, however investors are demanding a higher return on the mortgage bonds because of the fall out in the housing market. The spread between the two bonds was over 50 basis points last week, the highest it has reached since 1991.

The rapid rise in oil prices and the recent CPI report for the month of January have had a large impact on the quick rise in mortgage rates. The concern is that rising inflation diminishes the return on the initial investment for the bond holder, making mortgage bonds less attractive, thus causing rates to move up.

When will the new Jumbo Loan limits go into effect?

If the president signs off on the proposed economic stimulus package, you can expect that the restrictions for Fannie Mae and Freddie Mac to purchase loans over 417k to be lifted for a period of one year beginning July of 2008 and last for a 12 month period.

What is a stream line refinance?

A stream line refinance is when your lender agrees to refinance your existing mortgage loan and generally waive most of the third party closing fees such as appraisal, title work, etc. Some lenders who service their own loans can offer a streamline refinance to help make refinancing your loan more appealing, but it is always a good idea to compare their offer against the market to ensure you receive the overall best loan terms.

Mortgage rates have tumbled to 5 year lows, how low can they go?

Fixed mortgage rates have reached their lowest level in the past five years and are now in the low 5% range. This sharp drop has been directly tied into the significant drop in the stock market. This is an extremely volatile period, and while their is a chance rates could continue to edge down, their are a number of government initiatives aimed at boosting the economy that could ensure a fast market correction and a spike up with interest rates.

Which programs are offering better rates, variable or fixed mortgages?

The market has seen interest rates on both programs drop over the past 30 days. Many adjustable rate mortgages are tied into indexes such as the six month libor (4.33%) or the fed funds rate (4.25%), both of which have dropped significantly of late. The opportunity to lock into a fixed rate mortgage under 6% would make the most sense for many homeowners.

Where are mortgage rates compared to last year?

Thirty year fixed mortgage rates are around 6.125 % to start the new year. Last year at this time they were above 6.5%. Fixed mortgage rates have traded around 6% for the past 3 months.

What does the term rescission mean?

The term rescission or right to cancel is a term used in mortgage refinance transaction. If a borrower chooses to refinance their primary residence, they have the right to cancel this transaction for up to 3 days after they close. This is commonly referred to as a cooling off period.

If I make my January payment in December, how does that affect my taxes?

You are eligible to deduct the mortgage interest for the year in which you have made your payment, similar to your property taxes. Making your Jan 2008 pmt in 2007, will allow you to have more interest to write off for your 2007 tax returns, but will impact your write off's for 2008.

The FED lowered the fed funds rates, how will this impact mortgage rates?

The initial market reaction to the news has been favorable for mortgage securities and bonds. The stock market dropped sharply on the news. Keep an eye on the proceeding economic news as this could be only a short lived drop back for mortgage rates

What impact will the governments decision to freeze arm rates have on the industry?

The major focus of the plan initiated by Secretary Paulson is to try and reduce the number of homes heading into foreclosure. The plan which has many layers and qualifying caveats will target individuals who could not afford a rate increase on their arm. Fixed mortgage rates are near 2 year low levels, so if you have an arm your best solution would probably be to explore refinancing into a fixed rate mortgage.

The stock market appears to be surging, how will that affect mortgage rates?

Mortgage rates have dropped to their lowest levels in the past 12 months. Generally if money is taken out of the bond market and invested in the equity market, interest rates tend to move up.

How do you get your lender to drop PMI?

Most lenders will drop your PMI once you have reached a certain loan to value from making payment. Lenders do not assume that your home has appraised in value. If you want to have your home appraised to find out if you have reached the twenty percent equity requirement you should contact your lender to find out their specific procedure for having this done

What are the chances of the fed lowering rates in December?

Most economists believe the FED will lower rates, however this is all but certain. A few of the FED governors have indicated they believe the last adjustment dropping the fed funds rate by .25 pts was sufficient. The growing concern is that the economy is heading into a recession, the dollar is continuing to fall. The silver lining is that fixed mortgage rates continue to decline.

Will conforming loan limits be raised to help jumbo loan borrowers?

There is speculation that the government will allow Fannie Mae & Freddie Mac to raise loan limits above the $417,000 present limit. This will only benefit you if you would qualify for a full document underwritten loan

What happened to mortgage rates after the FED dropped the fed funds rate?

Mortgage rates have fluctuated quite a bit since the FED announcement. The stock market has been the primary driving force behind the changes and their is again a growing concern with foreclosures and the housing industry sinking the economy.

The FED meets next week, will they lower rates?

The majority of economists believe that the FED will lower the fed funds rate by at least .25 basis pts. The housing industry and credit markets are still significantly behind where they should be to provide a balance to the overall economy.

The stock market dropped over 300 pt's on Friday, why is that good for mortgage interest rates?

Investors who have pulled their money from stock investments, appear to be reinvesting this money back into the bond market. The net effect is that this is creating a larger buying base of mortgage backed securities which helps drive down mortgage interest rates.

Ben Bernanke indicates the housing market will continue to struggle, should we wait to try and refinance?

This depends on your situation. Mortgage rates are hovering in the mid 6% range which historically is very attractive. The downside to waiting to see if rates drop is their is a good chance your home value will probably continue to decline which may limit your options.

Is the market improving for jumbo loan financing yet?

The market for jumbo loans has improved over the past month and since the credit market crashed in mid August. To qualify for a competitive interest rate you will need to have a minimum of ten percent equity in your home.

How many months behind do you need to be on your mortgage before it can go into foreclosure?

You should refer to the original mortgage contract you signed when you took out the loan. In most cases once you miss 3 straight payments the lender can begin the process, however this can vary and every lenders process is different. If you fall behind on your mortgage you should contact your lender asap to find of if they offer a repayment program or can work with your specific situation.

Should I be comparing mortgage quotes if I am applying for an FHA mortgage?

Yes, FHA mortgage rates are not set by the FHA.  The FHA ensures the FHA loan with the lender, but the mortgage rates are market driven and will vary from lender to lender so it is a good idea to compare quotes to make sure you are getting a competitive mortgage offer.

Will the FED lowering the fed funds rate lower mortgage rates this year?

The immediate impact on lowering the fed funds rate is a move up with mortgage rates by .25 to .375 pts. Mortgage rates are driven by market buying and selling of mortgage backed securities. Many investors have taken their money out of the mortgage backed securities this week and invested into the stock market, which has helped to increase mortgage rates.

Can I do a 100% refinance with an FHA loan?

FHA loans require that you have a minimum of 3% equity in your home in order to refinance. In addition FHA requires that you are able to document your income and mortgage payment history.

When will the volatility in the market correct itself?

Many economists believe that the overall economy is still in good shape. The housing issues and credit problems in the financial area have started to spill over and effect the economy which will provide for continued volatility in the short term. Many experts predict the housing market will rebound by 2009.

Should we wait to see if the FED lowers the prime rate before refinancing?

Mortgage rates are generally tied into the trading of mortgage backed securities. If you are looking for a long term (30 year fixed) loan program, the market is presently at a 6 month low for these types of loans. If you are hoping to qualify into a jumbo loan or other niche product, you may need to wait until the FED lowers the prime rate, which hopefully adds liquidity to the secondary market and brings back some of the discontinued products.

Where can I find a company who will do a 2nd mortgage?

Depending on what state you live in and what your loan to value is, this may not be available to you at least for the short term. Your best bet to find a 2nd mortgage will be to shop around, check with some local banks and credit unions to start.

Who is Fannie Mae?

Fannie Mae is an organization that securities mortgage backed securities. They were originally a government owned entity, but are now a publicly traded company. They set standards for conforming loan programs and essentially ensure loan programs that meet this criteria with investors.

What impact will the FED cutting the discount rate by .5pts have on mortgages?

There will probably be no immediate impact with mortgage interest rates. the move was designed more to help with the credit issues that lenders and banks are facing. This may help to bring back some loan programs that lenders have been forced to discontinued, but it is too early to say this with certainty.

Will I be able to refinance a jumbo loan in this market?

The liquidity issues facing lenders will make it tough to refinance a Jumbo loan at a competitive interest rate. If you have  good credit, documentible income and a good loan to value try to find a lender that portfolios its own loans or a bank that carries its own paper.What impact will the credit issues facing the mortgage industry have on my ability to qualify or a mortgage?

If you are able to qualify for a loan insured by Fannie Mae, Freddie Mac, or FHA you will see a minimal impact. If you are looking for a jumbo loan, 80-20 loan, or 2nd mortgage you may be priced out of the market. This is a very volatile time for many lenders and the market could correct itself just as quick as things have turned for the worse, the best  thing to do would be to shop around and check with your lender as there guidelines evolve.

Will the FED announcement affect interest rates?

It is unlikely that there will be much of an impact in changing the markets present pricing of mortgage backed securities. There is a chance if the liquidity issues in the secondary market don't improve the FED could get involved, which would impact mortgage rates.

If I don't qualify for a traditional mortgage program, will I be able to refinance in today's market?

You should be prepared to be a significantly higher interest rate than you may have in the past. Many lenders have eliminated programs for non traditional borrowers due to the secondary mortgage market, meaning they can not sell your loan to investors.

What happens if my mortgage company goes out of business?

You should continue making your payments. There would probably be a court appointed trustee set up. It may be a good idea to send your payments certified mail to ensure that you have a track record of timely payments.

Will the volatility in the housing market have a long term impact on real estate values?

The short term answer is yes. Long term real estate is viewed as solid investment. The fact our population is continuing to grow should help create future demand.

With home prices falling in many areas, will this affect my ability to qualify for a new mortgage?

There is no direct connection with home prices falling and your ability to qualify for a new mortgage. There is however an indirect affect, which is that many lenders have seen a tightening of their underwriting guidelines in large part due to the fallout of riskier loans. This has aided to the housing decline and will make it more difficult to qualify for a new mortgage.

If I have a territory record or collection account on my credit report, will this prohibit me from getting a new mortgage?

This has the potential to effect your ability to obtain a mortgage. Depending upon how recent the negative credit issue is and what the overall impact is to your credit score, there may be an impact. The good news is there are other variables that may allow for you to qualify such as your work history, assets and overall credit history.

How do I determine what rate I will be at when my arm adjusts later this year?

First you will want to find the document called your mortgage note from when you closed on your present mortgage.  this document will tell you what your margin (the amount you add to the index is). You should then find the appropriate index (libor, fed funds, cofi) and refer to a newspaper such as the wall street journal for the latest rates on the indexes. By adding the two items together you should get a good estimate of where your rate will adjust to.

What does the FED have to do with mortgage interest rates?

The FED's responsibility is with monetary policy. The FED is in place  to set the FED funds rate or Prime Rate of which banks borrow money from the Federal reserve. They do not directly affect mortgage rates, however there a significant influence on the economy and market when they review the monetary policy, discuss or make changes to the FED funds rate, which can greatly change interest rates.

My home value is not going up and may have actually dropped in the past two years, should I consider refinancing into a 15 or 20 year mortgage?

This option would only make sense if you are able to drop your interest rate or have a variable rate mortgage. Otherwise, if you are concerned with paying off your home then you should simply add more to your present payment.

We refinanced our home last year and got a good interest rate but need to consolidate some credit card debt, should we look into a new refinance or a 2nd mortgage?

You need to review your options with a mortgage lender. Shop around for a few quotes with both scenarios and have the lender compare a new refinance off all of your debt versus a new 2nd loan, ask them to compute your blended interest rate and this will help you compare your options.

The FED announced they are not going to change the prime rate, how will this effect mortgage rates?

There was no immediate impact on mortgage rates as  a result of this announcement. Mortgage rates are likely to rise or fall based on the relevant economic news such as housing starts, employment and inflation. The market is trading somewhat sideways at the moment.

I just received a mortgage quote for a home equity loan, will prime be going up this year?

There is speculation that the FED may consider raising the fed funds rate later this year. They will look closely at the most recent inflation data as well as other relevant financial reports, right now this is too uncertain to predict.

How will my mortgage quote from May be affected by the rate increases if I am now ready to buy a new home?

Mortgage rates are now approximately .5% higher than in the previous month. You should contact your original lenders and ask for an updated mortgage quote

Should I consider a mortgage refinance now with rates increasing?

This depends on your present situation and the goal of your mortgage refinance. Mortgage rate are still near historical lows. You can refinance into a 30 year mortgage for under 7%. So you should evaluate your present mortgage rate and any other debt you may have before making  this decision.

How will the rise in mortgage rates affect my monthly payment?

If you have not locked in a mortgage rate and are in the process of purchasing or refinancing your home,  for every 100k you borrow, the effect of  a .75pt increase in rates equates to about $48 per month.

What is the main reason behind the sharp rise in mortgage rates?

There are a number of driving variables. The increased pressure of inflation, the decline of interest from foreign investors into mortgage bonds and the rise of money invested into the stock mart are all key factors

I am 73 years old, will I be able to qualify to refinance on a thirty year mortgage?

Yes, mortgage lenders are not allowed to factor in your age for qualifying purposes. This is illegal and  considered discrimination.

Should I work with a local mortgage if I am purchasing a home?

Depending on your situation, it is sometimes more advantageous to work with a local bank, if for example you are buying rural property. However, if your situation is not unique, then we would suggest comparing quotes from both local and national lenders.

What is the best way to compare mortgage quotes when rates are increasing?

This is a very common mistake borrowers make, they take too long to decide on a lender to work with. Most lenders change their loan pricing daily, so the best solution is to get multiple quotes on the same day and choose between them for the best offer.

I have noticed that mortgage rates are rising, what is the main reason behind this?

Much of the increase in mortgage rates can be directly attributed to the surge in the stock market over the past 60 days. There is reason to believe that the overall economy is doing better than expected any many investors have taken their money out of mortgage backed securities and placed this into the stock market, which has helped pushed the yield of mortgage rates up.

I want to buy a condo in Hawaii, but I live in Georgia, will I be required to go through a lender in Hawaii?

Most of our lender partners offer home loans in all 50 states. You should not have any trouble shopping for a mortgage if the property meets normal lending guidelines.

When comparing offers on a new mortgage quote for an investment property, how important will my credit score be in determining the interest rate?

Investment properties are considered higher risk loans. The lender will more closely examine your loan to value, assets, debt to income ratios and certainly your credit score. The higher your score, the more influence you will have in obtaining a better mortgage rate.

On a refinance mortgage quote, should I compare items such as title insurance?

Yes, you should review the cost of your title insurance charge. There should not be a significant difference in the premium for this from lender to lender, in some situations you may be able to choose our own title company to provide you with this policy. This is typically considered a third party fee.

If I refinance my mortgage into a 30 year term, but set up bi-weekly payments, how soon will this be paid off?

By entering into a bi-weekly payment plan with your mortgage, you are essentially adding 1 extra payment to the principal balance each year. This generally will allow your mortgage  to be paid off in approximately 23 years.

Will mortgage rates be impacted by the rising price of gasoline?

Yes, there is an indirect tie between the rise of commodity prices and mortgage interest rates. As the cost consumers pay for goods increases, the level of inflation increases and generally this leads to an increase with interest rates.

Is there a difference in a mortgage on a modular home?

Most lenders treat modular homes the same way they would treat a stick built house. This is something you should bring to our lenders attention before they order an appraisal.

I plan to refinance into a 30 year mortgage, with approximately a $200,000 balance. If I make a large payment of $100,000 in the next year will the affect my payment?

Certain loan types have a built in feature of recalculating your monthly payment (interest only loans). If you elect a principle and interest mortgage, then you should review this with your lender prior to closing and obtain in writing documentation that they will adjust your payment if the above scenario holds true.

How will the FED's decision effect mortgage interest rates?

There will be little impact on short term rates that are generally more responsive to changes to the fed funds rates. Long term 30 year fixed mortgage rates  will rise or fall based on thee release of economic data such as the CPI report, housing starts, etc. Overall there will be minimal impact from their decision.

 

 

 

Access our archive for more of your mortgage questions explained

 

Mortgage Refinance Q & A

 

Purchase Mortgage Q & A

 

Mortgage Interest Rates Q & A

 

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