My New Blog

You may know someone who has been hit hard by the mortgage crisis and having an adjustable mortgage. Many of the local homeowners I speak with and my past clients have been having second thoughts about keeping their adjustable mortgages. They are still well within range of having time to do things, but are wanting the comfort of a fixed rate mortgage. Given current market rates, many have decided to hold off until things look up in mortgage rates. However, that is a risky gamble to pursue. It is not to say that mortgage rates will come back down, time will tell. But if you do wait, you will be forced to accept market conditions and rates when you are forced to refinance due to an impending adjustment to your rate.

Some folks don't have the luxury of waiting. They have an adjustable mortgage that has adjusted and since have gotten behind in their payments. The reason this happens usually is because the driving force behind the rate changing is called the "index". Those first adjustments usually cause payments to skyrocket $300-$500 per month. Some can afford this first adjustment, but the financial strain of the higher payment, plus more adjustments coming in 6 month increments cause many people to fall behind. Usually this comes after savings accounts are drained and relationships are stressed out. Many homeowners are already having a tough time in today's economy, and this can send them over the top.

I have been working closely with my most recent FHA Secure client for almost 60 days. Now, you may think that is a longtime to refinance your home. But if it is due to an adjusted rate that caused your mortgage to become late, this is about average.

These clients had a great credit rating of well over 700 prior to the adjustment of the loan. After collecting all of the necessary documents, and submitting it to underwriting we got an initial suspense on the approval due to income calculations because my client is self-employed. The underwriters were looking at it one way, and I was looking at it also factoring in his 2008 year to date income, through being self-employed and having filed a quarterly estimated payment. Through working closely with the underwriting team, we were able to work through our different approaches to calculating his income and come up with something HUD will accept.

The clients will get their payment back down to where it was before the loan adjusted. However, this will be at 6.375% with a 30-year fixed rate mortgage. Prior, they were in a 40-year mortgage. So by changing the loan, they not only got their payment back to where it is affordable, but knocked 10 years off the life of the loan. This alone will save them well over $80,000 in interest on the loan.  

These loans aren't easy to get approved trust me! I have been the only one at my national mortgage bank of well over 100 branches around the country to get FHA Secure loans approved and closed. It is a great feeling to see folks who have owned homes for quite some time to remain in their home.

If you are or know someone who has gotten behind in their payments AFTER their mortgage adjusted let me know, you never know what can be done!

Ray

Well, we may be seeing the signs of better rates in the coming days. I am going to tell my current clients to hold off on locking their rate right now. The reason is last week mortgage rates got about .375% worse off their earlier levels. This pushed the 30 year fixed to about 6.25-6.375% on Monday of this week. Then we began to see a rally on the bond market.

The reason was we had punched through a ceiling of resistance for trading levels and created a new level of support, and also stocks began to sell off. Bonds seem to be crossing over from an "oversold" state and headed into better territory. So, if you were my client right now I would tell you to hold off on locking your rate. But keep a tight eye on the market for you, as the market has been very volatile as of late. It is always better to be safe and take a slightly better rate then to hold off and end up with a .25% higher rate in today's market. That decision could save you $10,800 over your loan on a $200,000 home purchase or refinance. Let me know if you are uncertain about getting the right advice on rates or are being given vague advice on what to do with your rate.

Ray

You may have been noticing that rates have gone on a steady uphill diet of getting worse. This is not surprising if you look at trends over the last few years. Every year around this point rates have risen to their highest point in June and July. A few months back I was pleading with a few clients to refinance and they decided they wanted to wait and see if rates came down. Now that the 30 year mark is sitting at 6.25% or higher refinancing doesn't make sense. If you are in a position of needing to refinance due to an A.R.M adjusting ask to do what is called a no cost refinance. This will allow for you to also refinance again when rates get lower and not pay the second set of fees to get a lower rate later in the year if rates dip again.

Most recently rates have gone up due to inflationary concerns over the European markets, and sky rocketing oil and food prices. As the cost of energy and food rises it causes more concern about inflation. If you follow my blogs you know that inflation is a bad word to mortgage bonds. The reason why? If you have a bond (note payable in the future, say 30 years like a mortgage) and there are inflationary concerns you are going to want a higher note (rate) on your bond to ensure that 30 years from now your return takes into consideration the time value of money. The answer is yes, you want to make sure your return paid out 30 years from now has the same value taking into account what a dollar would be worth at that time. In other words if you were paid out for your investment you would want your dollar to go as far 30 years from now as it would today.

If you need any questions answered about the state of rates as you look to buy a home or refinance your current home shoot me an email or call~

Ray