A Guide for Those Intrested In Refinancing a Traditional Mortgage to a FHA Mortgage

A Step-by-Step Guide to Refinancing a Traditional Mortgage to a FHA MortgageRefinancing a mortgage can provide a homeowner with many benefits, and some may be interested in refinancing their traditional mortgage into an FHA mortgage to take advantage of low interest rates. Depending on the specific circumstances, this step may lower the monthly payment, reduce interest charges, adjust the loan term so that it is more beneficial for achieving financial goals. Those who are interested in refinancing their mortgage may consider these steps.

Understand the Rules and Requirements

There are specific rules in place regarding refinancing under the FHA program. For example, the loan amount may be up to 96.5 percent of the value of the home, but the homeowner cannot take cash out of the refinance transaction. If cash is taken out, the loan-to-value limit under the FHA program is usually 86 percent of the property value.

These limits are in place for loan amounts that are $417,000 and under. Loan amounts that are between $417,000 and $729,750 will fall under a different set of rules. Homeowners should be aware of these rules to ensure that the FHA program is the best fit for their unique goals. If a FHA Mortgage does not fit your needs there are other optioans that may suit your situation better.

Review Goals and Current Mortgage Details

The next step for homeowners to take is to review their own financial goals and to define their reasons for refinancing. In addition, it is important for homeowners to contact their current mortgage company to learn more about their current interest rate, if there is a prepayment penalty and the current loan balance. Estimating the property value is also important. Homeowners may have a reasonable idea about property value, or they can contact a real estate agent for a valuation. When all of this information is taken into account, the homeowner will have a better idea about what to expect from refinancing.

Each homeowner will be in a unique situation regarding current loan details, property value and goals that they want to achieve through refinancing. It can be confusing to decide if refinancing is the right move to make, and it can be even more complicated to determine which loan program is a best-fit for the goals of the homeowner.

Those who are interested in refinancing their traditional mortgage into the FHA loan program or other refinancing program should contact their trusted mortgage professional soon to discuss the options and to determine if this is the best fit for their situation.

What’s Ahead For Mortgage Rates This Week – August 3, 2015

Whats Ahead For Mortgage Rates This Week August 3 2015Last week’s scheduled economic reports included the Case-Shiller 20 and 20-City Index reports, pending home sales data released by the National Association of Realtors® and the scheduled post-meeting statement of the Federal Reserve’s Federal Open Market Committee.

Case-Shiller: Home Prices Growing at Normal Pace

The Case-Shiller 20-City Home Price index for May reported that year-over-year home prices grew by 4.40 percent year-over-year. S & P Index Committee Chair David M Blitzer said that home prices are increasing gradually by four to five percent a year as compared to double-digit percentages seen in 2013. Mr. Blitzer said that home price growth is expected to slow in the next couple of years as home prices have been growing at approximately twice the rate of wage growth and inflation, a situation that is not seen as sustainable.

Denver, Colorado led the cities included in the 20-City Index with a 10 percent year-over-year growth rate for home prices. San Francisco, California followed closely with a year-over-year gain of 9.70 percent and Dallas Texas posted a year-over-year gain of 8.40 percent.

Fastest month-to-month home price growth in May was tied by Boston, Massachusetts, Cleveland, Ohio and Las Vegas, Nevada with each posting a monthly gain of 1.50 percent. May home prices remain about 13 percent below a 2006 housing bubble peak.

Pending Home Sales Down From Nine-Year Peak

According to the National Association of Realtors®, pending home sales dropped by 1.80 percent in June as compared to May’s reading. The index reading for June home sales was 110.3 as compared to May’s index reading of 112.3. This indicates that upcoming closings could slow; June’s reading represented the first decrease in pending home sales in six months. Lawrence Yun, chief economist for the National Association of Realtors®, cited would-be buyers’ decisions about whether to hold out for more homes available or to buy sooner than later will affect future readings for pending home sales.

Fed Not Ready to Raise Rates, Mortgage Rates Fall

The Fed’s FOMC statement at the conclusion of its meeting on Wednesday clearly indicated that Fed policymakers remain concerned about economic conditions and are not prepared to raise the federal funds rate yet. The FOMC statement did not provide any prospective dates for raising the target federal funds rate, which is currently at 0.00 to 0.25 percent, but the Fed continues to watch employment figures and the inflation rate.

Freddie Mac reported that mortgage rates fell last week, likely on news of the Fed’s decision not to raise rates. Average mortgage rates fell across the board with the rate for a 30-year fixed rate mortgage dropping by six basis points to 3.98 percent; the rate for a 15-year fixed rate mortgage dropped by four basis points to 3.17 percent and the average rate for a 5/1 adjustable rate mortgage fell by two basis points to 2.95 percent. Average discount points remained the same for fixed rate mortgages at 0.60 percent and fell from 0.50 percent to 0.40 percent for 5/1 adjustable rate mortgages.

What’s Ahead

This week’s economic calendar includes reports on consumer spending, core inflation and consumer spending. July readings on Non-Farm Payrolls and the national unemployment rate will also be released along with regularly scheduled weekly reports on new jobless claims and mortgage rates.

 

First-time Home Buyers: Why Splurging for a Larger Home Beats Condo Living

First-time Home Buyers: Why Splurging for a Larger Home Beats Condo Living Some first-time home buyers are on a tight budget when making their real estate purchase, and there may be an inclination by many to purchase a smaller property, such as a condo, rather than the home they truly want. While there may be some initial financial benefit associated with buying a smaller property, there are a few benefits associated with splurging and buying a larger home as a first purchase. By analyzing these benefits, first-time home buyers can make a more informed decision about how to proceed.

Costs Associated With Upgrading In The Future

Some people will purchase a smaller property initially with the goal of later upgrading to a larger property. This can provide the home buyer with the initial benefits of building equity, taking advantage of tax benefits associated with real estate ownership and more. However, there are costs associated with selling property, including closing costs, real estate fees, make-ready and improvement costs and more that should be considered.

Benefits Of Long-Term Ownership

For many, there will be a need to have a larger property over the years, such as when starting a family or when young children grow into teenagers who need more space. When the first property purchased is large enough for the family to grow into, the homeowner can enjoy long-term appreciation and equity growth. More than that, the higher value of the property may mean that there is more upside for property appreciation over the years.

Getting Established In A Community

In addition to the financial benefits associated with investing in a larger property initially, there are intangible benefits. Moving into a new home in a few years means that there is a need to get re-established in a community. When a home buyer settles down into a larger home that he or she plans to stay in for many long years or even decades, getting established and settled in the community can begin right away.

These are considerable benefits that can be enjoyed when a first-time home buyer makes a purchase that he or she plans to enjoy for many years to come, but there are other factors to consider. Each person needs to make a decision regarding a real estate purchase that is best for their needs, goals and financial situation, so there is not a best-fit solution that is right for everyone. Those who are thinking about buying their first piece of real estate should consider contacting their trusted mortgage professional for assistance to determine what they can afford and to discuss the loan process.

Federal Reserve FOMC Announcement

Federal Reserve FOMC AnnouncementThe stage was set in high suspense for FOMC’s post-meeting announcement on Wednesday. As fall approaches, analysts and the media are looking for any sign of when and how much the Fed will raise its target federal funds rate. According to CNBC, some analysts were projecting two interest rate hikes before year end, but the truth of the matter remains unknown until the Federal Open Market Committee announces its intentions.

Meanwhile, reports of what Fed rate hikes will mean for consumers were released prior to the FOMC statement. Real estate analyst Mark Hanson said that a rate hike would “crush” housing markets, which continue to improve slowly in spite of the current 0.00 to 0.25 percent federal funds rate.

Last Friday’s report on June sales of new homes shows unpredictable progress in housing. Analysts estimated that new home sales would reach 550,000 units based on May’s reading of 517,000 new homes sold. June’s reading came in at 482,000 units sold.

FOMC Statement: Current Federal Funds Rate “Remains Appropriate”

The Federal Open Market Committee of the Federal Reserved announced as part of its post-meeting statement that it would not immediately increase the federal funds rate. The FOMC statement cited concerns over the inflation rate, which remains below the Fed’s goal of 2.00 percent. According to the statement, the FOMC will not move to raise the federal funds rate until the committee is “reasonably confident” that inflation will achieve the committee’s goal of 2.00 percent over the medium term.

No prospective dates for raising the target federal funds rate were given. The FOMC statement repeated language included in previous statements indicating that committee members anticipate that economic events could further postpone increases in the federal funds rate. The FOMC statement asserted that committee members continue to monitor domestic and global financial and economic developments as part of the decision-making process for raising the target federal funds rate.

FOMC members agreed that policy accommodation may be required “for some time” after the committee’s dual mandate of maximum employment and 2.00 percent inflation have been achieved. This suggests that FOMC members are not in a hurry to boost rates when economic uncertainty remains.

In terms of housing markets, the Fed’s decision not to raise rates likely caused a sigh of relief as rate increase would have caused consumer interest rates including mortgage rates to rise.