Monthly Archives: June 2012

Why Are Mortgage Interest Rates So Low?

In response to Market Watch’s recent in-depth analysis of the U.S. mortgage refinance housing market, RoadFish.com’s men’s lifestyle and finance magazine encouraged readers considering a home refinance or a home purchase to take advantage of the nearly record-low mortgage interest rates, as they are predicted to eventually climb…

“So for folks who are considering mortgage refinancing a home or a new home purchase, my advice would be to take advantage of the current interest rates now because, who knows, it could be another 40 or 50 years until we see them this low again.”

RoadFish.com men’s lifestyle and mortgage refinance magazine today urged those of its readers who are toying with the idea of mortgage refinancing their home or home buying to consider acting fast, as a recent evaluation of the housing market revealed why mortgage interest rates are at a near all-time low and why they may be turning around soon. In fact they are so low that mortgage interest rates have even exceeded the expectations of professionals, begging the question of how mortgage interest rates are continuing to decline every week.

Amy Hoak of the Wall Street Journal’s Market Watch reported that before the week of June 14th, rates on the average 30-year fixed rate mortgage broke record low levels for six straight weeks. During the week of June 14th the same interest rates averaged 3.71% as quoted by Freddie Mac. In her article, Hoak deftly addresses the curious situation of U.S. home mortgage interest rates continuing to decline even as statistics show that the housing market is making a comeback. Hoak points out that factors from abroad play a large role in influencing mortgage interest rates, and that there are additional issues within the U.S. federal government that citizens may not be aware of that are influencing the home loan market.

RoadFish.com urged its readers to heed the information in Hoak’s article and act on it, if that is their intention. RoadFish.com’s senior staff writer is quoted as saying, “This is a big deal. Home mortgage interest rates haven’t been this low in over 40 years. I checked Freddie Mac’s table of the monthly average rate for a 30-year fixed rate mortgage, which goes back to 1971, and it doesn’t even begin to touch the rates we’re seeing in 2012. So for folks who are considering mortgage refinancing a house or home purchasing, or for first time home buyers, my advice would be to take advantage of the current interest rates now because, who knows, it could be another 40 or 50 years until we see them this low again.”  The above-mentioned Market Watch article reported that one of the biggest domestic factors in influencing interest rates is the U.S.

The Federal Reserve’s Operation Twist Program, According to Freddie Mac’s chief economist Frank Nothaft, says this program is based on the U.S. Federal Reserve purchasing long-term securities and selling so called “short-term” debt, which in turn keeps the interest rates low for the moment. The article also reports that the Eurozone crisis is currently playing a big role in the state of mortgage rates within the U.S. Concerns revolving around the continued integration of the euro zone is causing investors to transfer more money into places where they believe it will be protected. In so doing, this move affects yields on investments (such as 10-year Treasury notes) by decreasing them. Hoak reports that the mortgage market uses yields on the 10-year Treasury as their baseline when determining interest rates for 30-year fixed interest loans, so the yields on investments has a direct impact on affecting the mortgage rates.

RoadFish.com also encouraged readers to do their research and prepare for a large financial move such as refinancing or purchasing a home, and not simply to take advantage of the current rates if it is not within their means. RoadFish.com’s senior staff writer is quoted saying, “The most important thing to remember with any major financial decision is to do your homework. Adopt a ‘home buyer beware’ mentality, because then you will research high and low and get a solid amount of information before proceeding. Also, you need to do what’s best for your own financial situation. Yes, the rates are incredibly low, but if purchasing a house this year is not within your budget then don’t jump on it simply because it’s a good deal. As I said, do your homework. Study your budget. Work on your credit report. Make sure your decisions make sense, and are not impulsive.”

Hoak’s article concludes by stating that these all-time-low mortgage interest rates are expected to eventually being climbing. The last time that mortgage interest rates bottomed out to as low as they are today, it was April 1956—fifty-six years ago.

All About Foreclosure

As you know, if you don’t pay your monthly mortgage payments over a period of time, the mortgage company can foreclose. This means you will lose title to your property and may be evicted from your home. A foreclosure becomes part of your credit report and may adversely affect your ability to obtain credit in the future. To avoid possible foreclosure, it is helpful to have money saved to cover several months of your housing costs in case of an unexpected emergency, like job loss, divorce or separation, serious illness, or the death of a loved one.

What if You Cannot Pay Your Mortgage?

1.  Apply with us today!  Click Here Now.  A representative will contact you shortly thereafter.
2. Contact an attorney.  We cannot stress this enough.
3. You have likely called your mortgage company and they refuse to help you.  This is standard.  But again, do not despair.

Too many people in financial trouble wait until the last minute.  Some hope their problems will quickly resolve themselves. Others worry the mortgage company will rush to collection or foreclosure. In a significant number of all foreclosures, the borrowers did not return their mortgage company’s calls or written invitations to discuss payment options.  The truth is: the longer you wait, the greater your chance of losing your home. If you are unable to make your mortgage payment, use the form above. Depending upon your situation, here are a number of alternatives that professionals will discuss with you.  Here’s things you should know:

  1. Forbearance is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when you can show that funds from a bonus, tax refund, or other source will let you bring the mortgage current at a specific time in the future.
  2. A Reinstatement occurs when you pay your mortgage company the total amount you are behind, in a lump sum, by a specific date. This is often combined with forbearance.
  3. A Repayment Plan is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
  4. A Loan Modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. Common loan modifications include:
    • Adding missed payments to the existing loan balance (get current with your payments)
    • Making an adjustable-rate mortgage into a fixed-rate mortgage (turn your high ARM into a low fixed rate mortgage)
    • Extending the number of years you have to repay (to lessen your monthly payments forever)

Home Improvement Loans 203(k)

A home improvement loan is money lent to a property owner for home repairs, updates or remodeling.  Home improvement loans are not necessarily secured by the property they are intended for and may simply be classified as home improvement loans by the lender.  These loans can be secured or unsecured and are usually short term.

Home improvement loans are intended to increase the value of your home so it is important to think carefully about where best to put the money.  After all, the money spent on home improvements is added to your overall cost of the home and you want to be able to recoup this cost if and when you decide to sell.

Things to consider about home improvement loans:

  • Are you over-building for the neighborhood?  Adding a huge addition could make your house the nicest on the block but also the largest and most expensive, making it potentially harder to sell.
  • How much equity is available for home improvements and what is your maximum budget?  If you paid only $50,000 for your home ten years ago and now similar homes on your block are selling for $120,000, then you will have no problem investing in updates and repairs
  • Are you getting the most for your money?  Research has proven that upgrades to kitchens, baths and curb appeal offer an excellent return on your investment. Make sure you spend the money where it counts.

Ideas for home improvement loan project:The improvement possibilities for your home improvement loan are almost impossible to calculate.  While there are many decorating and design improvements possible, here are a few that are good to consider.

  • Additions – If you have a 2 bedroom, 2 bath house, consider adding a third bedroom. Similarly, if you have a 3 bedroom, 1 bath house, consider adding a second bathroom. And last but not lease, if you have a 2 bedroom, 1 bath house, consider adding a master suite complete with his and her closets and a full bathroom.
  • Updates – Concentrate on bathrooms and kitchens when spending the money from your home improvement loan. Kitchens and bathrooms seem to get outdated so quickly so it is important to use classic design concepts and soft, neutral colors. The lime green bathtub was a hit in 1975 but now desperately needs to be replaced.
  • Curb Appeal – Basic improvements such as landscaping or exterior painting can make a huge difference in the overall perception and value of your home. Keep these projects in mind when setting the budget for your home improvement loan project.

While the goal of your home improvement loan is to make repairs or upgrades to your home, the challenge is to make that money go even further, raising the value of your home above and beyond the level of money spent.

Funds for Handyman-Specials and Fixer-UppersThe purchase of a house that needs repair is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.  The problem is solved by HUD:

203(k) HUD Rehab Mortgage Insurance Summary:
Section 203(k) insurance enables home buyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.

Purpose:Section 203(k) fills a unique and important need for home buyers. When buying a house that needs repair or modernization, home buyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment. However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.

For less extensive repairs/improvements, see Streamlined 203(k). For housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD’s Title I Home Improvement Loan program. Deceptive Home Improvement Contractors Complaints

HUD insures loans to help people renovate and repair their homes through programs called Title 1 and 203(k).  Some deceptive contractors in the program were performing shoddy work, falsifying documents, and overcharging homeowners. This fraud had victimized thousands of families and cost the taxpayers millions of dollars.

To avoid becoming a victim of fraud, work only with a HUD-approved Title 1 or 203(k) lender. This allows you to select the contractor and helps to prevent inflated estimates that only increase costs.

To report any fraud or abuse in the Title 1 or 203(k) Program, call toll-free (800) CALL-FHA or (800) 225-5342 or TTY (800) 877-8339.

Reverse Mortgages

Frequently Asked Questions about Reverse Mortgages

The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage program, which enables you to withdraw some of the equity in your home.  The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements and more.  You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or downloading their free booklet, “Use Your Home to Stay at Home,” a guide for older homeowners who need help now. It is smart to know more about reverse mortgages, and decide if one is right for you!

reverse-mortgage-kit
1. What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you.  However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.  You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
2. Can I qualify for FHA’s HECM reverse mortgage?
To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan. You can find a HECM counselor online or by phoning (800) 569-4287.

3. Can I apply for a HECM even if I did not buy my present house with FHA mortgage insurance?
Yes.  You may apply for a HECM regardless of whether or not you purchased your home with an FHA-insured mortgage.

4. What types of homes are eligible?
To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

5. What are the differences between a reverse mortgage and a home equity loan?
With a second mortgage, or a home equity line of credit, borrowers must have adequate   income to qualify for the loan, and they make monthly payments on the principal and interest.  A reverse mortgage is different, because it pays you – there are no monthly principal and interest payments.  With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.

6. Will we have an estate that we can leave to heirs?
When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid.  All proceeds beyond the amount owed belong to your spouse or estate.  This means any remaining equity can be transferred to heirs.  No debt is passed along to the estate or heirs.

7. How much money can I get from my home?
The amount you may borrower will depend on:
  • Age of the youngest borrower
  • Current interest rate
  • Lesser of appraised value or the HECM FHA mortgage limit of $625,500 or the sales price; and
  • Initial Mortgage Insurance Premium–your choices are HECM Standard or HECM SAVER
You can borrow more with the HECM Standard option. In addition, the more valuable your home is, the older you are, and the lower the interest rate, the more you can borrow.  If there is more than one borrower, the age of the youngest borrower is used to determine the amount you can borrow.  For an estimate of HECM cash benefits, select the online calculator from the HECM Home Page. Many online reverse mortgage calculators can provide you with an estimate of the amount of funds you can borrow.

8. Should I use an estate planning service to find a reverse mortgage lender?
FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA-approved lender.  You can locate a FHA-approved lender by searching online at http://www.hud.gov or by contacting a HECM counselor for a listing.   Services rendered by HECM counselors are free or at a low cost.  To locate a HECM counselor Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you.

9. How do I receive my payments?
You can select from five payment plans:
  • Tenure- equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
  • Term- equal monthly payments for a fixed period of months selected.
  • Line of Credit- unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
  • Modified Tenure- combination of line of credit and scheduled monthly payments for as long as you remain in the home.
  • Modified Term- combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
10. What if I change my mind and no longer want the loan after I go to closing?  How do I do this?
By law, you have three calendar days to change your mind and cancel the loan.  This is called a three day right of rescission.  The process of canceling the loan should be explained at loan closing.  Be sure to ask the lender for instructions on this process.  Mortgage lenders differ in the process of canceling a loan.  You should ask for the names of the appropriate people, phone numbers, fax numbers, addresses, or written instructions on whatever process the company has in place.  In most cases, the right of rescission will not be applicable to HECM for purchase transactions.