JUMPING ON THE REFINANCE BANDWAGON?
FHA LOANS, HOME LOANS, TIPS FOR BUYERS, TIPS FOR SELLERS
January 10th, 2009
Homeowners ears are perking up at the news that mortgage rates are dropping to historically low levels. In the past few weeks, rates for a 30-year fixed rate loan have been bouncing around the 5% mark. Those with adjustable rate loans or interest only loans are contemplating a refinance to take advantage of this rare opportunity.
These rates are not available to everyone. You must have good or excellent credit (generally a credit score above 720 or so), a job with verifiable income and at least 20% equity in the property to be refinanced. The loan amount will also have to be less than $417,000 or the loan will be classified as a jumbo loan with a significantly higher interest rate (exceeding 6%).
If your credit falls short of what conventional lenders will consider “A” credit, FHA loans may be an alternative. This government insured loan allows lower credit scores and higher debt ratios. The lender is protected to some extent by the insurance provided by the Federal Housing Administration. The downside to FHA financing is the hefty Mortgage Insurance Premium (MIP).
There is speculation that once President-Elect Obama is sworn in, the financial markets will respond favorably and push mortgage rates even lower. However, if everybody and their mother rushes to refinance their homes at the same time, the demand for mortgage funds could cause rates to spike upwards. I have never known anyone that has a crystal ball than can predict the future of mortgage rates. I believe anyone applying for a refinance should lock-in their interest rate and fees with a lender that will deliver a lower rate if they do go down significantly. Ask your lender of choice what their loan lock policies are before making a written commitment.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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