tararyan's posterous

All-time Low Mortgage Rates

Low_interest_rates
I never thought I would see this day, but we are seeing rates in the high 3's on 15 year fixed loans and in the mid 4's for a 30 year fixed.  It's amazing - rates are currently the lowest they have ever been since they began them recording 36 years ago.  You may have heard how difficult it is to refinance in 2010 -- qualifying is harder and property values in Atlanta are down a bit.  Add to that the fact that the big banks are now working on 90 day rate locks because they are so backed up with applications, and many people are just choosing to sit this out.  But you owe it to yourself to at least take a look at the options.

Why are rates so low?
This all started back about 2 years ago when the Federal Reserve was trying to stimulate the housing market by artificially driving down mortgage interest rates.  They spent $1.25 trillion dollars buying mortgage-backed securities.  The program worked - rates dropped overnight.  What's amazing is that even though the program ended recently on March 31, rates have continued to improve!  The recent continued drop in rates is largely a result of the financial instability in Greece and the rest of Europe and fear that it would become a worldwide problem.  When investors are fearful, they buy safe securities such as mortgage bonds.  The more demand for those bonds, the better rates get.
Who can take advantage?
Here's a checklist to see if you qualify:
  • Equity of 5% in the property?
  • Middle credit score of 620 with a fairly clean credit history for the past 12 months?
  • Divide your total monthly debt by your total monthly income.  Is that number 0.50 or less?  If you are self employed, use your average NET income for the past 2 tax years from your tax returns.
  • Has your income been fairly reliable for the past 2 years?
  • If you are self employed, have you been self employed for 2 years in the same line of work?

If you can answer yes to all of those questions, then you most likely qualify.  If you have an FHA loan, you can refinance WITH NO APPRAISAL REQUIRED, so you can ignore the first item regarding equity.

What if my home has lost value?

There is a government program that could still allow you to refinance.  It's called HARP - Home Affordable Refinance Program, and it was implemented in 2009 to try to assist more homeowners to be able to refinance.  In short, if your loan is held by Fannie Mae or Freddie Mac, then this program allows you to refinance even if your home has declined in value.

For example, if you purchased with 20% down, but your home has declined in value - the program allows you to refinance anyway, WITHOUT ADDING MORTGAGE INSURANCE.

But how do you know if you are eligible?  It's easy to check.  Visit the following websites and fill in the form and you will get a message indicating whether Fannie Mae or Freddie Mac own your mortgage.  Keep in mind that while your bill comes from Wells, Chase, Citi, BofA, etc, in most cases those loans are ultimately held by Fannie or Freddie - so do yourself a favor and check.

If you have any questions about your eligibility to refinance or if you want to see what your options look like, please don't hesitate to contact us to discuss the specifics of your situation.  And take advantage of the lowest rates in history!