Mortgage Refinance Today Is Problematic

A thirty year fixed home mortgage refinance is now priced from 4.750% and 5.250% charging the borrower minimal or no points for a no cash out refinance. The rates shift daily for home mortgages depending on economic conditions, but haven't changed much from this range since last year.

Each bank has the opportunity to offer their service portfolio a government stimulus refinance plan from the U.S. Dept of Treasury called the "Making Home Affordable" Plan. This mortgage loan product allows home mortgage refinance with property valuation from the bank's automated valuation process and also allows loan approval with a higher debt to income ratio than generally allowed.

The stimulus refinance program refers to the refinance of 30/20/15/10 year fixed mortgages. Some lenders added the 5/7/10 year ARMs.

This plan is beneficial to borrowers who have undergone the loss of a percentage of their earnings and/or devaluation of their homestead due to general financial conditions. This package offers assistance to borrowers who have gone delinquent in their monthly mortgage payments.

What the Plan Will Not Allow:

The automated appraised value cannot show the home value over 105% of the current loan amount, 110% in certain cases.

The homeowner must have a job and cannot have become business owners in the last 24 months.

The refinance must show a benefit to the borrower by dropping rate and monthly payment or taking the customer from an ARM or pay option ARM to a fixed product.

*Also note the product will not allow a borrower to refinance home equity lines of credit. Second mortgages are subordinated to allow the refinance to proceed.

When refinancing your mortgage, requesting your current mortgage company's version of the "Making Home Affordable" plan should be enough to let your bank know the specific program you're interesting in exploring.

The stimulus refinance plan refers to the refinance of 30/20/15/10 year fixed mortgages. Some lenders added the 5/7/10 year ARMs. The mortgage plan is basically a streamline refinance, but with the added advantage of no appraisal. In this financial atmosphere of declining market values and rampant job losses, it allows a lower monthly payment and a savings every month..

Government VA and FHA home loans still allow the Interest Rate Reduction Loans with no appraisal except under certain circumstances. Borrowers presently in an FHA or VA loan should use this option as the stimulus plan cannot make the change from a government loan to a conventional conforming program. FHA and VA loan rates are about the same as conventional conforming rates. Both translate to substantial savings every month for most refinanced mortgages with rates around 5% from a median 6.5% a year ago.

Buying down the rate will allow an even lower rate, but a borrower should plan to remain in the dwelling long enough to recoup the cost of the points paid. Each point represents 1% of the loan amount. The costs to close the loan may be added into the loan and refinanced as well so that no out of pocket expense will be paid by the homeowner.

Rates for loans less than a 30 year term are not as low. It appears lenders are more interested in locking in a long term borrower than short term ones. 3, 5 and 7 year ARM loans give no measurable break in interest rate from a 30 year fixed. It is suggested a homeowner set up their home mortgage refinance on a 30 year term, but make the payment based on the payment for the term they wish.

Call your current mortgage company for information specific to your mortgage loan.

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