Mortgage Industry And When Is It Suitable For A Homeowner To Refinance
The housing market and Mortgage Lending has changed and it may be forever, who knows. Not I for sure, but as I watch what is going on in the market and with the endeavors of the current Administration trying to help save some of the housing market disaster, it is clear that there will never be as many people who obtain home-ownership as previously was. Just in case some do not know the Obama Administration has created a Mortgage Remedy through the Investors (FNMA, FHLMC, and FHA) for individuals who are in trouble and it is within this aspiration these homeowners may be able to hopefullyrefinance their loan. These people should contact their mortgage lender or servicer of their loan. One rule to know is that for the modification, your housing ratio is important in determining if you are eligible for the modification. You need to know how income iscomputed and that your housing expense can be no more than 31% of your income.
I can’t say that the new guidelines which are more restrictive are all bad, because look at where we are because of the relaxed rules that were applied. After getting updates from the major investors; FNMA, FHLMC and FHA, and having underwritten loans before this dilemma began, I am clear on one thought. If the rules had not changed by the investors mentioned above, it might have saved some of the stupor we have seen. Some of the same guidelines which have been put back into place were very similar and there from the beginning and if they had stayed as they were; America would have been a lot better off, in many aspects such as the financial crisis situation. Let’s say even before the Desk Top Underwriter and Loan Prospector became the instructions of approving a loan for Fannie and Freddie with of course, the Underwriter sound judgment as when to question these automated systems.
The Mortgage Refinance Boom is still going strong for many. Bank of America and Wells Fargo has posted profits and many others as well. There have been many refinances and a lot of profits as the Banks are still collecting the fees which they must have to survive.
Is it alwaysadvisable to refinance your loan? You have to decide but you should know the facts before endangering your equity position in your home. The facts are this; you should be able to decrease your interest rate by at least two (2) percentage points to benefit from a refinance transaction. If you do not, you are giving up your equity ownership for what I call, just a minor change in your payment and interest over the life of a loan. What some mortgage holders forget is the interest amount of your payment decreases each month and you pay more principal with each payment you make, which is only minimal in the beginning. It also depends upon your interest rate. If you are paying a higher than usual interest rate, yes it is good to look into a change in your loan. But you should check with a Lender who offers no origination fee or discount points.
Why do I say the above? Okay, if you have to add back the closing cost in your balance, this will in some cases send your balance over the top again, if you have only had your mortgage for a short time. If you have a 80% loan, you do not want to go over the 80% loan to value as you would have to carry Mortgage Insurance (Conventional loans), which insures the Lender in case of unpaid mortgage loans. FHA loans will have upfront MIP (mortgage insurance premiums) and monthly insurance premiums. If a person can pay the closing cost out of pocket then it can be to your advantage. Remember to ask questions, and get answers. It is your home, your future and your life.
