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Refinance Articles

News and information on refinancing your home in MN or WI

Getting a mortgage loan after paying cash for a home

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In today’s market, it is pretty common to pay cash for a home in the Twin Cities area. Maybe because you needed to act fast and didn’t have time to get a loan, or maybe because of the condition on the home, the house wouldn’t qualify for traditional financing.

Regardless of the reason, I speak with a lot of customer who pay cash for a home, then want to take a standard mortgage loan out against it right away. You may be able to take cash out, but there are rules to understand.

Cash out refinanceCash back after buying with cash rules

While each lender may be slightly different, here is the common Freddie Mac rules for getting cash back.

Primary Residence and Second Homes Only:

If you’ve owned the home MORE than 6 months.  Normal cash out refinance rules apply.

If you’ve owned the home LESS than 6 months,  then ALL of the following requirements must be met to get the loan:

  • The executed HUD-1 Settlement Statement from the purchase transaction must evidence that no financing secured by the subject property was used to purchase the subject property.
  • The Borrower must be reflected as the owner of the subject property on the preliminary title report and there must be no liens on the subject property.
  • Source of funds used to purchase the subject property must be fully documented.
  • If funds were borrowed to purchase subject property, those funds must be repaid and reflected on the HUD-1 Settlement Statement for the refinance transaction.
  • The amount of the cashout refinance Mortgage must not exceed the sum of the original purchase price and related Closing Costs, Financing Costs and Prepaids/Escrows as documented by the HUD-1 Settlement Statement for the purchase transaction.
  • There must have been no affiliation or relationship between the buyer and seller of the purchase transaction.
  • The cashout refinance Mortgage must comply with the applicable Loan-to-Value ratio limits and all other Freddie Mac requirements

Sorry, Minneapolis rates are NOT going back down!

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Minnesota mortgage ratesMinneapolis, MN:  This isn’t easy to say, but understand…  rates are NOT going back down to where they were last month.

Today’s mortgage rates for the best customers at about 4.625%, but range up to  above 5%, based on lender, credit score, program, down payment, etc..  Our quoted rates today are 1/2% higher than just last Monday. Volatility is the name of the game, as we have seen rates  jump by as much as .25% in interest rate in a single day. What we quote in the morning may be long gone by the afternoon.

With the drastic and dramatic jump we’ve seen since May 3rd, consumers may have thrown the brakes on for looking at houses, or refinancing  – waiting for rates to come back down.  It is important that you a work closely with your favorite Mortgage Loan Officer to understand rates, what they are, why they move, and if you should lock in a rate.

While I don’t know for sure, I believe the 4.50% – 4.75% range is our new floor of support for a little while.  We may see a slight uptick, and we may also see a minor drop as the market players settle into the new reality, but the 30-year fixed rate loan in the 3’s is now just a memory.

 

As mortgage rates climb, beware of not accurate quotes

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Fed Chairman Bernanke

St Paul, MN: Mortgage rates the last few weeks have climbed steadily on the statement from the Federal Reserve that they plans to scale back, and ultimately end the buying of Mortgage backed Securities by the middle of 2014.
This news translated into mortgage rates having one of the worst weeks in history, with Friday alone generating a 1/4% rise in interest rates. While 1/4% isn’t a killer by itself, combined with the rate increases from the earlier part of the week, the combination proves to be a nightmare for mortgage rates. Real mortgage rates ending Friday for the best clients are now about 4.625%.  This compares to 3.50% just a month ago.

BEWARE OF WHAT YOU READ – Not all Mortgage Quotes are current

I took numerous calls this week, where clients complained about the rate I was telling them compared to what they were reading elsewhere for “average rates.”  Most of the average rate information published on web sites, newspapers, and reported by the media comes from the weekly rate report published by Freddie Mac.  While the report is great for tracking averages over time, it is the AVERAGE of rates compiled through the end of the previous week, then reported on the following Thursday.

freddieAnother problem is many web sites don’t update daily, or even weekly.  Newspapers, and other print media may have collected rate information on Wednesday morning for publication in Sundays paper. This week, that would leave people with quotes at least .375% to .500% lower than reality.

If you are buying Google stock, does it matter what last week average price was, or what you can buy if for today?  Only rely on constantly updated and accurate rate reporting system, or while a phone call to a Loan Officer.

Check LIVE and CURRENT MN and WI Mortgage Rates 24/7

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Mortgage Rate Perspective

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balance_ratesMinneapolis, MN:  With rates having moved up slightly recently, it is good to keep current mortgage rates in perspective.

Here is a mini historic look at conventional 30-yr fixed loan rates

  • In the early 1960’s = 5.25%
  • In June 1971, about 7.53%
  • In June 1981, about 16.70%
  • In June 1990, about 10.16%
  • In June 1998, about 6.99%
  • In June 2000, about 8.29%
  • In June 2005, about 5.58%
  • In June 2009, about 5.52%
  • In June 2010, about 4.75%
  • Last month (May 2013) about 3.54%
  • Today… about 3.91%

I bought my first house in 1981.  I paid 16% for my FHA 30-year fixed!  That same loan today is 3.50%

Less underwater homes as values increase

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banner_ad_appraisalUnderwater Mortgages Drop by 850,000

Minneapolis, MN:  Millions of homes went underwater at the beginning of the real estate and mortgage crash. Underwater homes, where the owners own more on the mortgage loan than the home is currently worth, have been a thorny issue, preventing many people from refinancing to today’s low mortgage rates, or from selling their homes.  If has also cause many people to throw in the towel and simply walk away from their home.

CoreLogic, a real estate data firm has reported that an estimated 850,000 homes are no longer underwater in the first quarter of 2013 due to rising home values.  They also reported that another 11.2 million homeowners are now in a “low equity” position, which means they are no longer underwater, but have only a little equity.

This means an estimated 9.7 million homes, about 1 in 5 are still underwater.

Another 11.2 million homeowners were in a low-equity situation, not underwater on their mortgage but with less than 20 percent equity in their homes, a situation that can make refinancing difficult or more expensive.

Rising values

The combination of low mortgage rates, and less foreclosures on the market has help boost values and increased sale prices the past year.  In the metro Twin Cities area of Minneapolis / St Paul, average home values have risen 15.1% in the past year alone.

Real Estate is local

Just a few states account for the almost 1/3rd of underwater homes. Florida, Michigan, Arizona, and Georgia. Many people in the Twin Cities are now able to sell and move up to a bigger home, or to easily take advantage of low mortgage rates again, especially with programs like HARP, the Home Affordable Refinance Program, which was specifically designed to assist underwater homeowners who got their current mortgage loan prior to June 1, 2009.

Mortgage Rates up for 5th straight week

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Minneapolis, MN:  Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed mortgage rates climbing higher for the fifth consecutive week on concerns the Federal Reserve may slow its bond purchases amid a strengthening economy. This marks the first time the average 15-year fixed-rate mortgage has gone above 3 percent since the week of May 24th of last year.

check_ratesNews Facts

  • 30-year fixed-rate mortgages averaged 3.91 percent with an average 0.7 point for the week ending June 6, 2013, up from last week when it averaged 3.81 percent. Last year at this time, the 30-year FRM averaged 3.67 percent.
  • 15-year fixed rate mortgages this week averaged 3.03 percent with an average 0.7 point, up from last week when it averaged 2.98 percent. A year ago at this time, the 15-year FRM averaged 2.94 percent.
  • 5-year adjustable-rate mortgages (ARM) averaged 2.74 percent this week with an average 0.5 point, up from last week when it averaged 2.66 percent. A year ago, the 5-year ARM averaged 2.84 percent.

Quotes
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

“Continuing market concerns that the Federal Reserve may slow its bond purchases amid a strengthening economy added upward pressure on mortgage rates this week. In its June 5th regional economic conditions report, known as the Beige Book, the Federal Reserve noted that overall economic activity increased at a modest to moderate pace over April and May in all its districts except for Dallas which indicated strong economic growth. In addition, pending home sales rose in April to its fastest pace since April 2010 and May’s consumer sentiment was revised upwards to its highest reading since July 2007.”

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Freddie Mac’s survey is the average of loans bought from lenders * last week, including discount points. Applicants must pay all closing costs at these rates. No cost loan rates higher.

Follow this link to view today’s best MN and WI mortgage interest rates.

Wells Fargo and B of A top in complaints

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St Paul, MN:  This isn’t shocking news to us, but it looks like the big banks, Wells Fargo and Bank of America, top the list of consumer complaints – especially for mortgages.

Read the story from the Washington Business Journal at http://tinyurl.com/ljs3csh 

You can avoid a lot of the problems if you understand who you are working with. Always work with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who just quotes rates, but is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

80% of Loan Officers are NOT Licensed

CHECK YOUR LOAN OFFICER OUT on the Nationwide Mortgage Licensing System and Registry 

http://www.nmlsconsumeraccess.org

Bank Loan Officers (Registered) versus SAFE ACT (Licensed) Loan Officers?
There is a BIG difference YOU need to understand

Washington has been busy protecting consumers from bad lenders right? Wrong! They have only done half the job, and sadly, the general perception by the public as to who is the better lender choice is completely wrong. Most people feel the brokers and the non-bank mortgage lenders have created all the problems. This isn’t true. Just the opposite. Consider the fact that Fannie Mae, Freddie Mac, and banks make the rules, and the banks review, underwrite, and fund the loans for brokers.

Recent changes to the lending industry requires all loan officers to have a tracking number, known as an NMLS number (Nationwide Mortgage Licensing System and Registry). It should be displayed on their business cards, E-Mail, web sites, all correspondence, and most loan documents. The display of the NMLS number may incorrectly make consumers believe the Loan Officer is licensed. Only 20% of Loan Officers are licensed. The rest are simply registered. Working with an unlicensed, untrained Loan Officer is not in a consumers best interest.

Simply put, Loan Officers at Banks, Credit Unions, or Mortgage Companies owned by a bank are NOT REQUIRED to be licensed, take classes, take continuing education, or pass any state or federally mandated tests to be a Loan Officer!

It is hard to determine if the Loan Officer is simply registered, versus licensed. nmls_checkWhen looking up a loan officer, you have to go to the bottom of their NMLS identification page and look under State Licenses/Registrations or Federal Registration heading.

  • A LICENSED Loan Officer will say “State Licenses/Registrations” and will have one or more STATES listed with all their state licensing information listed.
  • An UNLICENSED, but simply REGISTERED Loan Officer will say “Federal Registration” and the something like “Federal Mortgage Loan Originator”.

Now I am not trying to make this into a David versus Goliath story, but I am trying to emphasize the huge differences between Loan Officer training and education.  Look at it a different way. If you are sick and go to the Doctors office. Do you want to be treated by the receptionist, or the Doctor?

Refinance with no appraisal

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appMinneapolis, MN:  As mortgage interest rates fell to all-time lows earlier this year, even underwater homeowners were able to take advantage of refinancing through mortgage programs that do not require a property appraisal.

No appraisal refinances make the refinance process easier than ever, especially for those homeowners that own more than their home is worth.

Some of the most popular no-appraisal refinance programs include the FHA streamline refinance and the HARP (Home Affordable Refinance Program).  Other no-appraisal refinance programs include the VA streamline or VA Interest Rate Reduction Refinance Loan and the USDA streamline refinance.

While many home values are on the rise across the United States, many homeowners continue to owe more than their home is worth and are unable to qualify for a traditional refinance to lower their interest rate. Under theses streamlined no-appraisal refinance programs, homeowners are able to successfully lower their interest rates without assessing their home’s value.

On average, homeowners that take advantage of a no appraisal refinance program are able to yield a savings of about 35 percent. If your home is currently underwater and you have not been able to qualify for a traditional refinance, look into a no appraisal refinance.

Rates Tick Up – Buyers Want to Lock Low Rates

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Minneapolis, MN: Mortgage interest rates have been near historic lows for a long time. Home buyers have fallen into a feeling that low mortgage rates are normal.  That attitude changed a bit recently as mortgage rates jumped up to the highest level in over a year.
lmrInterest rates on baseline  30-year fixed mortgage  surged 12 basis points to average 3.9% in the week ended May 24, the highest level since May 2012. The upward trend went even slightly higher this week, with most lenders reporting best execution rates at 4.00%
The slight up-tick in rates has caused many potential buyers to jump off the fence, and act now before interest rates go any higher.

So why are rates moving higher?  It is complicated, as there are many factors, but the simplest explanation is that the economy is slowly getting better.

Another big reason is that the FED has been propping up mortgages by being the primary buyer of mortgage backed securities. Without them buying these securities, the entire mortgage system would collapse. While they have, and continue to say they will buy the securities for the immediate future, there are signs that this policy may be changing, with a pull back of the buying because of the improving economy

Simply put, rates may be slowly starting to return to where the market should be if supporting itself, and not being propped up by the Fed.

Your cost for new mortgage compliance

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Minneapolis, MN: We all know about, and most of us have been effected by the real estate and mortgage industry meltdown. The government agencies, many of which have been created since the meltdown, including the Consumer Financial Protect Bureau (CFPB), come at a significant cost to you for their new “protection” and compliance rules.

cfpb_logoDid you know the average cost of originating a mortgage climbed from $2,291 in 2009 to $3,353 in 2013? That’s because today, mortgage lenders must comply with about 350 different federal, state and local rules. Of course those charges are past on to you.

The sad thing, is very little within the new rules have actually made a large difference on the street. Rather, most of the rules have done little to correct anything  except reduce consumers ability to get loans. The increasingly stringent laws and regulations are affecting the mortgage industry and leading to higher costs and risk for lenders.

A great example of the new laws and costs, yet didn’t hit its mark has to do with the difference between licensing requirements for Loan Officers. If your Loan Officers works at a bank, credit union, or mortgage company owned by a bank or credit union, the Loan Officer has no mandated educational requirements, no state or federal requirements, no continuing education requirements, and simply has to get registers into the National Mortgage Licensing and Registry System (NMLS).

On the other hand, if your Loan Officers works for a non-bank lender, or for a broker, they must complete educational requirements, plus pass both state and federal testing requirements. They are also required to have yearly continuing education.

This means that today, roughly 80% of all Loan Officers are unlicensed, with no mandated testing or education, yet the vast majority of consumers believe all of them have a license.

nmls_checkTo check if your Loan Officer is licensed, go to www.NMLSconsumeraccess.org.  Type in the Loan Officers name or NMLS number. At the bottom of the page, it will say Licenses/Registrations.  If there are one or more states listed, that Loan Officer is Licensed.  If it says “Federal National Loan Originator”, that person is NOT licensed.

When getting a mortgage loan, likely the largest financial transaction of your life.  If is probably prudent to work with a licensed professional.

FHA changes drive homebuyers to conventional loans

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St Paul, MN: FHA mortgage loans are due on June 3rd, 2013 to make a significant change that is driving more clients to conventional loans.  New FHA loans after that date that have less than a 10% down payment or equity for a refinance, will now have mortgage insurance for the life of the loan.  Currently FHA mortgage insurance goes away once the loan is paid down to 78% of the original value.
Eric Metzler, a Senior Mortgage Loan Officer with Cambria Mortgage in St Paul, MN.,  said clients currently in the process who can afford a slightly higher down payment of 5%, versus FHA’s 3.5% minimum down payment are all going with a conventional loan.
He further indicated that it is a pretty simple choice. The difference between 3.5% down, and 5% down for many isn’t much money. But the dramatically higher monthly mortgage insurance, high initial up-front mortgage insurance premium, and now mortgage insurance for life has killed FHA for all better qualified home buyers, leaving only those with weaker credit to need an FHA Loan.
updateThe major reason FHA has increased the costs is an effort to replenish their default pool of money because of recent losses due to the market crash. But now less and less people are taking FHA loans. The pool of FHA clients will no longer have a blend of strong and weak buyers, they will only have weak buyers – resulting in a more risky pool. Something that got them into trouble to begin with.

Those with excellent credit can sometimes even obtain a 3% down conventional loan.

The new rule also effects the popular FHA Streamline Refinance.  Those refinancing their FHA loan will now have PMI for at least 11-years if they are 90% loan-to-value or better, or life of loan if over 90% loan-to-value.

The trend toward conventional had already started over the past few years as FHA made several increases to the cost of their loans with higher mortgage insurance rates.  The “life-of-loan” requirement starting June 3, 2013 is the proverbial straw in the camels back for many home buyers.

Historical perspective on assumable loans.

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How about some historical perspective and history lesson on assumable loans? keys

I recently received this note: “FHA and VA had assumable loans back in the day. All you did was sign the assumption form and pay $300 or transfer everything.  The original borrower was not released from liability, and the vet did not regain VA eligibility until that loan paid off.

In the past…

READ THE FULL STORY

 

Average Home Buyer Numbers

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fico_graphMinneapolis, MN:  According to a recent information from EllieMae, the average mortgage customer today has the following status:

  • Average credit score: 743
  • Average down payment: 19%
  • Average housing debt ratio: 25% of income
  • Average overall debt ratio: 35% of income
  • Average score of a denied client: 702

Where do you fit?

Do NOT let this fool you.  I was rather shocked to read this information. That doesn’t sound like my average customer!

Best advice? Contact a local licensed mortgage professional.  Provide them with a full application, and let them determine if you qualify for a mortgage loan with your credit score, your income, and your down payment size.

Economy stimulated by low mortgage rates

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Minneapolis, MN:  As mortgage rates continue to hover near the all-time historic low rates that we saw last November (2012), the nation’s overall economic outlook has seemed to improve.

saveIn November 2012, rates fell down to levels that had not been seen since 1971. While current rates are not at all-time lows, they are just slightly above those rates, and at levels that have not been seen since January.

The low mortgage rates are helping to stimulate the recovery of the housing market. They low rates have helped to increase home sales and home refinances. Many current homeowners have taken advantage of the low rates by refinancing their home loans, freeing up money to be spent elsewhere.

While the Federal Reserve plans to continue to keep mortgage rates low through the purchase of mortgage-backed security bonds, mortgage rates are not likely to stay this low forever. CNN Money expects that as the economy continues to improve over the course of the year, mortgage rates will begin to rise this fall – but just slightly.

Taking advantage of mortgage rates while they remain low is essential. First time home buyers can afford to purchase a property that is on average 20 percent more expensive than they were when mortgage rates were in the 4-5 percentile range. Refinancing to shorter term can also help buyers pay off their home in less time and lower their monthly mortgage payments.

HARP Refinance program extended to 2015

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underwaterMinneapolis, MN:  The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to extend the Home Affordable Refinance Program (HARP 2.0) by two years. The program was to expire at the end of 2013, but will NOW expire December 31, 2015.

The program is being extended so more underwater homeowners can benefit from refinancing to today’s low mortgage interest rates.  Already, some 2 million plus homeowners have successfully refinanced their homes using the HARP 2 refinance program.

FHHA also announced they will be launching a nationwide campaign to inform homeowners about HARP refinances, and eligibility requirements.

LEARN MORE about the HARP Refinance Program

To be eligible for a HARP refinance homeowners must meet the following basic criteria:

  1. The loan must be owned or guaranteed by Fannie Mae or Freddie Mac (Check and see for free)
  2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  3. The current loan-to-value (LTV) ratio must be greater than 80 percent.
  4. The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.

If your current loan is an FHA Loan, or a VA Loan, you also have refinance options if your home is underwater with a FHA Streamline Refinance, or a VA IRRRL Streamline Refinance.

 

What is your home worth? Find out for free…

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banner_ad_appraisalWhat’s the value of your home? (MN & WI Only)

Many homeowners are curious about the appraised value of their home. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, everyone has lost value.

But things are changing, average home values the past 12 months in the Minneapolis / St Paul, MN area have risen on average 14.1%.  So what your home is worth today?

There are many sites that claim to give you are idea, including Zillow, Trulia, and more. It is also a well known fact those sites have very questionable data, giving values that range from close, to crazy far off. The big problem is, where is the data they use coming from and how accurate is it?

We have a different tool to answer the estimated appraised value of your home question. Our system uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

While the estimate may not be the actual or appraised value of your property, this can be a much more useful too than Zillow to gauge fluctuations and trends in your market which affect your home’s value.

Want to check your homes value? Simple click the link below! (MN and WI homes only)

FREE HOME VALUE ESTIMATE