Interest Rates still at historically low levels!!!!!!!!!!!! But for how much longer?


photoAnother week of strong economic data would normally push mortgage rates a little higher, however, rates recovered some ground instead and ended the week slightly lower. The big report this week was a very strong Retail Sales report. This report is always watched very closely as a major economic indicator due to Retail Sales accounting for about 70% of 
all economic activity in the US. This kind of strong economic growth should support continued improvement in the housing market.
Regarding some day-to-day stuff…it is normal this time of year to see pending closing dates on agreements of sale going into the summer. Often the pending close date is outside the free 60 day rate-lock period Trident honors. (which is nice considering most banks/lenders/brokers will only lock for 30 days for free) In these extended closing date cases we can lock the rate for longer than the standard 60 days, but there are costs associated with this option. Typically the cost is about .5% of the loan amount for every extra 30 days needed in the rate-lock period. While the buyer will always have this option to pay to lock-in we’ll also track the rates closely for your clients if they choose not to lock-in and patiently wait until they’re within the 60 day free rate lock period.cropped-2.jpg

Good news for Home Flippers! FHA loosens Guidelines! www.PhillyRealEstateInvestorDeals.com

FHA says flip away — within limits

Temporary waiver of 90-day ‘anti-flipping’ rule extended through 2014

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=50051356" target="_blank">Foreclosure sale</a> image via Shutterstock.Foreclosure sale image via Shutterstock.

Good news for single-family home investors, rehabbers and buyers seeking to use low down payment FHA financing: The temporary waiver of FHA’s 90-day “anti-flipping” rule was extended last week through 2014.

The waiver, which facilitates purchases of homes from sellers who have held title to their properties for less than 90 days, continues a policy first adopted by the Obama administration in 2010.

Starting in 2003, FHA had imposed the 90-day standard as part of an effort to rein in rampant quick-flips of houses where investors made minimal or no improvements to rundown, foreclosed or abandoned houses, then sold them days or weeks later at high price markups with the help of inflated appraisals to purchasers using FHA loans.

Those flips frequently involved collusion and fraud by teams of mortgage loan officers, realty agents and appraisers — even straw buyers who defaulted and disappeared without making a single payment — and racked up significant losses to FHA’s insurance fund. Neighborhoods suffered because the properties remained empty and in bad physical condition, depressing values of houses in the immediate vicinity.

Since 2011, FHA has made annual extensions of its waiver. This year, an FHA official told me Friday, the agency opted for a two-year term in order “to provide greater levels of certainty” for lenders and buyers, removing questions about whether, and for how long, the waiver would be continued. Since the first waiver in 2010, according to the official, FHA has successfully insured $11 billion worth of mortgages on 65,250 homes where the seller had held title for less than 90 days.

In a Federal Register notice Nov. 29 announcing the extension, Acting FHA Commissioner Carol J. Galante said the objective is to increase “the availability of affordable homes for first-time and other purchasers, helping stabilize real estate prices as well as neighborhoods and communities where foreclosureactivity has been high.”

Among the key requirements that will continue during the latest waiver:

  • All transactions must be arm’s-length, with no identity of interest between the buyer and seller or other participants. Lenders are required to ensure that the seller actually holds title to the property. (In earlier flipping schemes, buy-sell transactions sometimes moved so fast that the seller never acquired legal title.) There should be no “pattern” of previous flips of the property during the 12 months preceding the transaction.
  • In cases where the sales price of the resold property is more than 20 percent more than what the seller paid for it, there must be documentation showing the renovations and repairs that justify the markedly higher resale price. A second appraisal may be used to substantiate the increase in value, but the second appraiser must be selected from FHA’s roster. When no significant renovations occur and the price is 20 percent higher than acquisition, the appraiser must provide “appropriate explanation” for the sudden increase.
  • Inspections are required of all the key components of the building structure and systems when price jumps exceed 20 percent. The inspection report must be provided to the purchaser before closing. If the inspection reveals structural or “health and safety” defects, repairs must be completed before the closing and a final inspection performed to ensure that the repairs have been made.

Real estate professionals and others involved in single-family investment activities welcomed the latest extension and its two-year time span. Kevin Kim, an agent with Windermere Preferred Living in Brea, Calif., said “this definitely benefits my investors, but it’s also good for communities” where high rates of foreclosure have left properties sitting around in deteriorating conditions.

Kim said most of his investor clients do not exceed the 20 percent price-increase threshold — “typically it’s more like 10 to 12 percent” — but they virtually all try to acquire, renovate and resell in less than 90 days.

Cathy Bureau, broker-owner of Green Home Realty in San Antonio, Texas, who specializes in the central areas of the city, says FHA’s two-year extension assures investors that there will be takeout financing for buyers, thereby cutting costs on the “hard money” line of credit financing they use to acquire their houses. At interest rates of 14 to 16 percent, “every day costs money,” she said, so for investors the ability to sell quickly after completing repairs is crucial.

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

 

Pro’s and Cons of Refinancing… www.PhillyRealEstateInvestorDeals.com

2Up in the air about refinancing your mortgage?

That’s okay. Refinancing, which is essentially the process of paying off your existing mortgage with a new one, isn’t the right option for everyone. And for this reason, it’s important to weigh out the pros and cons.

By doing so, you can determine if you’ll actually benefit from refinancing.

For example, you could be lowering your interest rate by 25 percent, but if that comes with thousands of dollars in closing costs, it could take a long time to break even, says Shashank Shekhar, a loan originator with Arcus Lending in San Jose, California.

Not an easy decision is it? To help, we’ve hashed out the pluses and minuses of refinancing to see if it makes sense for you and your financial situation.

[Think refinancing is right for you? Click to compare rates from multiple lenders now.]

Keep reading to learn more…

Pro #1: You Could Score a Lower Interest Rate

This is perhaps the biggest pro of refinancing your mortgage: a lower interest rate.

Of course, you’ll need to first qualify for the lower rate, but if you do – you could be saving a lot of money. In fact, even an interest rate that’s a half percent less could garner a good chunk of savings.

Just consider this example from the Federal Reserve, which compares the monthly payments on a 30-year fixed-rate loan of $200,000 at 5.5 and 6 percent interest.

Monthly payment @ 6 percent: $1,199
Monthly payment @ 5.5 percent: $1,136
The difference each month is: $63
Over 10 years, you will save: $7,560

Now, imagine the savings if you could lower your interest rate by 1 or 2 percent…

[Want to lower your interest rate? Click to compare rates from multiple lenders now.]

Con #1: Refinancing fees

Getting a lower interest rate sounds great, right? Of course it does. But like most things in life, there are costs that come with refinancing  – and these costs could really add up.

“It is not unusual to pay 3 percent to 6 percent of your outstanding principal in refinancing fees,” according to the Federal Reserve, which adds that fees could include an application fee, loan origination fee, an appraisal fee, and more. “These expenses are in addition to any prepayment penalties or other costs for paying off any mortgages you might have.”

A prepayment penalty, in case you’re wondering “is a fee that lenders might charge if you pay off your mortgage loan early, including for refinancing,” according to the Federal Reserve.

So, before you refinance, you’ll want to do some research and make sure that the refinancing savings will outweigh any and all fees.

Pro #2: You Can Shorten the Length of Your Mortgage

What exactly is the benefit of refinancing to a shorter term mortgage, you ask?

For starters, shorter-term mortgages – like a 15-year mortgage versus a 30-year mortgage – generally has lower interest rates, according to the Federal Reserve.

What’s more, the shorter your mortgage term, the sooner you’ll be out of debt and the less interest you’ll have to pay in the long run.

For example, the Federal Reserve says to compare the total interest costs for a fixed-rate loan of $200,000 at 6 percent for 30 years with a fixed-rate loan at 5.5 percent for 15 years.

Monthly payment Total interest
30-year loan @ 6 percent $1,199 $231,640
15-year loan @ 5 percent $1,634 $94,120

While the total interest savings are indeed significant, “The trade-off is that your monthly payments usually are higher because you are paying more of the principal each month,” says the Federal Reserve.

[Ready to switch to a 15-year loan? Click to compare rates from multiple lenders now.]

Con #2: If You Move Out of Your Home Soon, Refinancing Could Cost You

Planning to move out of your home in the next few years? If so, it may not be the right time to refinance.

Why? Because if you move soon after you refinance, “The monthly savings gained from lower monthly payments may not exceed the costs of refinancing,” the Federal Reserve says.

If you will be moving – and you still want to refinance – the Federal Reserve suggests using a break-even calculation, which could help you figure out whether it’s a smart decision.

Unfortunately, sudden changes like job relocation or a divorce may be out of your hands.

But if you do sense that the future in your home is a bit unstable, you may want to hold off on refinancing.

Pro #3: You Could Switch to a Fixed Rate Mortgage (FRM)

Cheat sheet: an interest rate on a fixed-rate mortgage (FRM) remains the same for the life of the loan, while an interest rate on an adjustable-rate mortgage (ARM) adjusts periodically based on an index.

And if you currently have an ARM, now is a great time to refinance to an FRM.

In fact, with rates at historic lows, an average of 3.39 percent on a 30-year fixed-rate mortgage as of November 1, according to federal lender, Freddie Mac, there may not be a better time to refinance.

“Given the uncertainty in the real estate market and the historical low rates on offer now, I always advise my clients to go with a FRM wherever possible,” explains Shekhar.

So, to avoid any uncertainty with your mortgage payments, you may want to refinance and lock in today’s record-low rates.

If you’re still unsure, then consider this: If you stick with an ARM and rates go up in the next few years, will you be in utter regret?

[Think a fixed-rate mortgage is right for you? Click to compare refinance mortgage rates now.]

Con #3: If Your Credit Score is Bad, Refinancing May Yield a Higher Rate

Have you struggled to make your last few credit card payments? Has your credit score suffered as a result?

If so, refinancing may not be in your best interest, especially since a bad credit score often means having a higher rate when you refinance, explains Shekhar.

“For every 20 point drop in credit from 740, you pay higher in closing cost, interest rate, or both,” says Shekhar. “In some cases, your closing cost can increase by 2 percent or more.”

As you can see, a bad credit score could definitely work against you during the refinancing process.

So, before you refinance, it might be a good idea to try and improve your score by paying credit card bills on time and keeping balances low on your credit cards, according to myFICO, the consumer division of the Fair Isaac Corporation, which provides a global standard for measuring credit risk.

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