Utah Home Mortgage Specialist

Exciting News for Veterans!

The First Time Home Buyer and Long-time Resident Tax Credits have been extended for Military Personnel and certain Federal Employees.   Here are the basics:

• You must have been on active duty outside of the US for 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
• The home needs to be under contract by April 30, 2011
• You need to be closed by June 30, 2011
• You must been either a First-Time Home Buyer or Long-Time Resident 

Those are the basics of this new law.  If you have any other questions feel free to go to the IRS website and see the all the rules and restrictions.

I’ll see you at closing!

Interest rates have enjoyed record lows during the last few years allowing many people to refinance and enjoy lower home mortgage payments. Now, interest rates are beginning to move in the other direction. 

Why would anyone refinance when rates are going up? With cash-out refinancing, you refinance your mortgage for more than you owe and keep the difference.

1. Pay off home equity credit lines. Most HELOC loans have variable rates that go up when the Federal Reserve raises short term interest rates. Recently, the Federal Reserve announced its first rate increase and they sent out a strong message they will continue the short term interest rate increase. Using a refinance to pay off a HELOC not only will lower your existing HELOC interest rate, but you can stop worrying about the Fed …for your second mortgage at least.

2. Consolidate your mortgages.  Unless you put 20% or more down on your home, there is a good chance you did a combination (or piggyback second mortgage) loan to avoid PMI (Private Mortgage Insurance) which is required on loans with less than a 20% down payment. Second mortgages typically carry higher interest rates and a cash-out refinance may allow you to consolidate these loans into one lower monthly payment. Even if you need to pay PMI it may be a less expensive monthly payment overall.

3. Secure A Fixed Rate Mortgage. Rates for adjustable mortgages, which are sensitive to Fed moves, may rise faster than fixed rate mortgages. Borrowers with loans close to a rate adjustment are facing an increase in monthly payments and the possibility of even higher rates down the road. Many borrowers who plan to stay in their homes are fending off the higher rates and potential future increases by refinancing into fixed rate mortgages.

4. Improve Your Home. Home Equity Lines of Credit and fixed rate second mortgage rates have been rising. A cash-out refinance can prove to be a cheaper way to finance your home improvement, especially as the cost of the improvement increases.  Improvements made after the refinance may lead to even greater increases.

While many people will no longer be interested in refinancing for a lower rate, there are many reasons to consider refinancing even as interest rates increase. If you have an existing second mortgage, need cash to consolidate credit card debt, or want to do some home improvements, refinancing your current home mortgage may be the best financial move for you. For more information regarding current rates contact me now.

Mortgage rates are rising as the markets believe the Federal Reserve will raise the interest rates higher.  Rates on 30 year mortgages are predicted to raise 0.50 to 1%  by the end of this year.  This is the highest rates we have seen in the last couple years.

Some analysts believe that new home sales will decline as the interest rates rise.  But as economic conditions improve and business activity improve we are also susecptible to inflation. Kansas City Fed President Thomas Hoenig argued at the Fed’s most recent meeting last month that the promise of low rates risks creating new bubbles in financial markets and lays the groundwork for unacceptably high inflation. He suggested that raising the federal funds rate “modestly higher” soon would lessen those risks.  But raising these rates will put pressure on home mortgage interest rates.

Leading economists are upbeat about the U.S. recovery, forecasting steady growth over the next two years as businesses grow and jobs return.  Manufacturing is improving at a slower pace.  Retail Sales have steadily increased.  Economists believe improvement in sales and profits will cause companies to put out the hiring signs relatively soon.

As jobs return, so will consumer spending, which should rise by 2.2% in 2010 and then climb 2.8% in 2011. These relatively small gains can be attributed to the fact that Americans are still feeling financially conservative.  Overall, economists believe we are on a fairly healthy growth track and there will be no double dip recession.

I am hoping the market recovery continues and we avoid more economic slowdown and inflation.

Interest rates can affect the type of home mortgage you choose and dictate when its wise to make a change. Here are a few of the factors that can be affected by a swing in interest rates:

Choosing a mortgage

When interest rates are rising, a fixed-rate mortgage is usually a good choice, since it locks in the current rate and protects you from the higher rates to come. When rates are falling, an adjustable-rate mortgage (ARM) becomes more attractive, as its interest rate changes periodically (usually every one, three, or five years), allowing you to benefit from the new, lower rates.

Some people choose an ARM even when rates are rising. This is because the interest rate on an ARM is substantially lower — as much as two percentage points lower than that of a 30-year fixed-rate mortgage. That means you’ll pay less until mortgage rates have increased a full two percentage points. After that, you’ll pay more than a fixed rate.

There are also hybrid ARMs, which have a fixed rate for a certain time period — typically three to 10 years — and then become adjustable. (A 5/1 ARM, for example, has a fixed rate for five years, after which the interest rate is adjusted annually.) Hybrid ARMs can be the right choice if rates are likely to rise in the short-term but then flatten or fall. However, these long-term trends can be difficult to predict.

Refinancing

A change in the interest rate trend can make it worthwhile to switch to a different type of mortgage. When rates are falling, you can save money by moving from a fixed-rate to an adjustable-rate mortgage, so you can benefit from the lower rates. If interest rates appear set for a sustained rise, switching from an ARM to a fixed-rate mortgage can lock in a lower rate and protect you from higher payments. However, you should make sure that any closing costs don’t offset the benefits of refinancing.

For more information on mortgages and interest rates, contact me now.

Analyzing APR during a home mortgage refinancing or second mortgage loan shopping can be a very tricky proposition.  Many people have come to believe that a loans APR, or “Annual Percentage Rate”, is the single most important factor in comparing home mortgage loans.  However, this is rarely the case, especially in today’s marketplace. 

Annual Percentage Rate is defined as “the cost of consumer credit as a percentage spread out over the term of the loan. Most consumers have no idea what makes up this elusive number.  APR is a valuable tool in comparing various mortgage loan programs, but it should never be relied upon as the sole determining factor in choosing a loan, for the following reasons:

1)  Not all closing costs are calculated within the APR uniformly.  There is a huge variance among lenders, mortgage loan officers, and even states on which fees they include in their APR when calculating the loan.  There is no standard among the mortgage industry, let alone among competing mortgage companies.

2)  The costs themselves can be manipulated within the loan.  For example, prepaid interest (the amount of pro-rated interest a consumer pays at closing for interest which will be earned from that date until the end of the month) can be represented as anywhere from 1 to 30 days, a potentially huge difference, especially on larger mortgage refinancing loans.

3)  Manipulation of the title fees.  Ordinarily, the title company’s settlement, or closing fee is an APR fee, while their title insurance cost is not.  Recently, in order to minimize the effect to the APR, title companies began simply decreasing their closing fee, while subsequently increasing their title insurance fee by the same amount, thereby reducing the APR.

4)  Lack of industry awareness of what is accurate.  Most mortgage loan or refinancing officers do not intentionally try to mislead, but inaccurate information could result in the consumer making a poor decision.

As opposed to APR, consumers would be better served by asking the following simple questions.

1)  What is the mortgage interest rate?
2)  What is the total mortgage loan amount?
3)  What is the monthly mortgage payment (principal and interest)?
4)  How much are the closing costs?

Generally, a written estimate covering all of the above can be generated by the mortgage loan-refinancing officer and provided to you in the form of a “Good Faith Estimate” and/or a “Truth In Lending Statement”.  Then, you can compare these documents between mortgage lenders in order to determine the authenticity and accuracy of your quotes. 

For further mortgage financing or refinancing information, contact me now.