If you have been contemplating a cash-out refinance, there are some important questions to ask yourself before moving forward. Since a cash-out refinance is essentially an action that will replace your current mortgage with a larger one, be sure to gather all the facts before finalizing the plan. In a cash-out refi, you are accessing some of your home’s equity, or taking out cash on the portion of your home that you have already paid for. For those who plan to stay in their home and do not mind extending the length of their mortgage, it could be a good fit. On the other hand, while this is an excellent way to put your hands on a lump sum of cash that can be used in a variety of ways, there are a few pitfalls. [Read more...]
Plan Ahead When Thinking About a Cash-Out Refinance
April 20, 2013 By Leave a Comment
You Might Consider an ARM Loan If…
April 11, 2013 By Leave a Comment
Adjustable Rate Mortgages or ARMs were quite popular during the housing boom. However, since the mortgage crisis, their popularity has diminshed, which is a shame, because for some borrowers they are an ideal choice. The main difference with an ARM and a traditional fixed rate loan is that the ARM has a varying interest rate. Their appeal is that they start off with an introductory rate period, for a set number of years, where the interest rates are often lower than those of traditional mortgages. That beginning period can span months or years with the most common introductory time frames being 3, 5 or 7 years. After that the interest rate can fluctuate based on the loans’ adjustment intervals, caps, and the margins which the loans are tied to. [Read more...]
The Return of Jumbo Lending
February 25, 2013 By Leave a Comment
Real estate lending has been a touchy subject in the US for the last four or five years. The Subprime Lending Crisis of 2007-8 left a bad taste in the mouths of many consumers, beyond that which is normally associated with mortgages. But as the housing market moves toward recovery, lending is back in the spotlight. Interest rates are at near-record lows, and housing prices are expected to rise in the not-too-distant future. As a result mortgage activity is rising in the US, as more new homes come under contract. However, growth of so-called “jumbo” loans is growing rapidly, such that the term may take on a new meaning.
Private jumbo loans are typically defined as home loans exceeding $417,000 in most markets, or alternately $625,500 in regions with higher real estate prices, such as New York or San Francisco. Currently, sales of luxury homes are on the rise. A recent CNN Money article reported that sales volume for homes priced at $1 million or more have more than doubled since last year, according to the National Association of Realtors. Likewise, the need for jumbo loans has grown. Lenders reported dispensing over $148 billion in jumbo loans over the first nine months of 2012, an increase of 23.3% from the same period a year prior. Originations of jumbo loans in 2012 were the highest since 2007. [Read more...]
Pros and Cons of an FHA Loan & Understanding Streamline Refinances
February 19, 2013 By 1 Comment
As part of a national effort to pick up the pieces in the years following the Great Depression, the FHA loan program was instituted in 1934. Since then, this more accessible home financing program has been made available to Americans who can not afford a typical down payment or do not qualify for private mortgage insurance. An FHA mortgage loan is guaranteed by the Federal Housing Administration and provided by a lender especially approved for the program (such as American Financial Resources).
In the aftermath of 2008 housing crisis, the FHA program has undergone a few modifications. The goal is to put the funds in easier reach of those who truly need them and qualify. An FHA mortgage may not be the best solution for everyone, however. Have a look at this quick overview of pros and cons so you’ll be able to get a better idea if this mortgage program might be right for you.
Pros
- FHA loans can have low down payments and affordable closing costs and fees.
- In addition to single-family homes, FHA mortgages can also be applied to qualified multifamily properties of 1 to 4 units.
- An FHA loan can fund the purchase of a depressed property and the cost of renovation.
- There are also FHA programs available for funding energy efficiency upgrades.
- Citizens who are 62 and older and qualify can use a FHA Reverse Mortgage to tap into the equity the’ve built.
- Prospective homebuyers interested in manufactured housing can also benefit from FHA financing. There are programs both for those who own their own land and for those who will be living in a mobile home community. [Read more...]
Shorter Loan Term versus More Financial Flexibility
February 6, 2013 By Leave a Comment
Whether you are crunching the numbers for a first time home purchase, contemplating moving up or downsizing from your current residence, it is important to explore your term options. 15-year loans have become very popular and can save a homeowner quite a bit on interest. Of course, the monthly payments are considerably higher than those within a traditional 30-year fixed rate mortgage.
To break it down, let’s use an example:
- Let’s suppose you took out a $330,000 30-year fixed rate mortgage at an interest rate of 5.25% a few years ago.
- Let’s also suppose you’ve managed to pay the balance down to $300,000.
- If you were to refinance to a 15-year fixed rate mortgage at a rate of 3.5%, your monthly mortgage payments would be $2,144
- If you were to refinance to a 30-year fixed rate mortgage with a rate of 4.25% instead, your payments would be $1,475 – more than $650 less than they would with the 15-year option.
- Under the second option, you would save on your monthly payments, but you would actually end up paying about $145,000 more in interest than with the 15-year loan.
Choosing which mortgage option is right for you requires more than a close look at your finances. This is one of those times when a crystal ball could come in very handy, unfortunately we can’t always predict what the future will hold. Before committing to a loan that calls for a substantially larger sum, it is vital to map out your situation in case there are unforeseen changes ahead. [Read more...]
3 Reasons to Consider a VA Loan
January 24, 2013 By Leave a Comment
Created in 1944, the Veterans Administration Home Loan Guaranty Program was established to assist service members returning from active duty, the opportunity to buy a home of their own. Since it came into being, over 18 million active duty, retired and reservist members of the military have realized the dream of home ownership. Because the Federal Government backs the loans, military borrowers benefit from very competitive rates and terms offered by VA-approved lenders. Here are three other reasons qualified borrowers should consider a VA loan:
- It is one of only two options to secure a home mortgage that requires no money down. The other is the USDA’s Rural Housing program. 100% financing is an opportunity few prospective home buyers can take advantage of!
- The underwriting standards for VA loans are much less stringent than for conventional loans. No private mortgage insurance is required either, which conventional borrowers must pay monthly unless they put down a minimum of 20% of the loan amount.
- The guidelines are more flexible than those of other mortgage programs. There are no prepayment penalties and with streamlined refinancing, no additional underwriting is required.
To learn more about VA loans and their eligibility requirements, discuss your next home purchase or refinancing strategy with a mortgage consultant from American Financial Resources. You can request free information by filling out our form to the right, or you may simply call us at 1-800-634-8616.
Close to 25% of HARP Borrowers Deeply Underwater According to FHFA
January 20, 2013 By Leave a Comment
On November 28th the Federal Housing Finance Agency, or FHFA, released its September Refinance Report. The report detailed the efforts of Fannie Mae and Freddie Mac through the Home Affordable Refinance Program known as HARP. It was noted that through the third quarter of 2012, approximately 25% of all mortgage refinances were done through the assistance program.
It was revealed that since the beginning of 2012, over 709,000 loans were refinanced through HARP. In September alone, more than 90,000 borrowers took advantage of HARP. Many attribute the high volume of participation to changes that made the program more accessible and to the continuing low mortgage rates.
Further analysis of the Federal Housing Finance Agency report showed that nearly 50% of the homeowners seeking refinancing assistance in September had LTV ratios more than 105%. Approximately one fourth of them held loans with LTV ratios that exceeded 125%. September’s figures also brought to light that 19% of HARP refinances were changed to 15- and 20-year mortgages. As opposed to the more traditional 30-year loans, the shorter terms allow homeowners to build equity at a faster rate. [Read more...]
3 Reasons to Consider a USDA Rural Housing Loan
January 17, 2013 By Leave a Comment
Rural homes are often financed through USDA Rural Housing Loan programs.
Although it is certainly not new, the USDA Rural Housing Loan program may be one of the most overlooked opportunities available to prospective home buyers. Established in 1949 by the US Department of Agriculture, its goal is to give residents of rural areas the opportunity to own a home and promote development in underdeveloped areas.
There are certain eligibility requirements for both the borrower and the property to be purchased. Borrowers must meet certain income, credit and employment requirements while the home to be purchased must lie within the USDA’s Property Eligibility Map.
The USDA works with approved lenders in all 50 states. Since the program began, over 2.7 million rural borrowers have become proud homeowners. Here are 3 compelling reasons why this is such an outstanding prospect for anyone thinking of buying a home:
Rural does not mean remote
Please do not assume that the eligible properties are all located miles and miles from civilization. A quick check with the USDA’s website will allow you to track down homes that meet the USDA guidelines. Guess what? Many of them are in close proximity to some of the nation’s fastest growing metro areas – including places like Austin, TX; Bend, OR; or Santa Fe, NM. [Read more...]
What Are USDA Rural Housing Loans?
January 16, 2013 By Leave a Comment
A USDA Rural Housing Loan is a special type of mortgage in which borrowers can finance a home that is located in an area designated as rural by the United States Department of Agriculture. Not all lenders offer USDA home financing; only lending institutions that are approved by the USDA can offer this type of mortgage to their clients.
USDA Rural Housing Loans are a popular choice for buyers, as the interest rates associated with this loan type are typically low and 100% financing is available for qualified applicants. Through this specialized program, borrowers must meet certain qualifying criteria in order to be approved for USDA home financing.
Eligibility is largely based on where the home to be purchased is located. In order for your property to qualify for USDA financing, the home must lie within the rural development boundaries established by the USDA. Even if the property you’re interested in doesn’t appear to be in a “rural” setting, it may still qualify for USDA home financing. If the property you’re considering is not eligible, don’t give up hope. When you work with a qualified mortgage consultant or real estate agent, he or she can help you find similar properties that lie within the USDA’s rural development map. [Read more...]
Two Important Financial Decisions to Make When Refinancing
October 22, 2012 By 1 Comment
For anyone who has equity built up in their home, today’s extremely low mortgage rates make refinancing a great way to free up some cash. If you’re contemplating refinancing your property, start by considering these two to factors:
Terms – Since rate-and-term refinancing is essentially taking out a new loan for the balance on your mortgage; you have the freedom to make some changes. One of those is the term of your loan. You may have the option to keep it the same, shorten it, or extend it for a longer period of time. Of course there are many factors to consider when zeroing in on the term. For example, you may have had a few pay raises and now have a better cash flow. In that case, you may want to go for the shorter term. That may increase your monthly payments, however, you’ll build equity faster and likely save money over the course of the loan. If your salary has not changed or you anticipate big expenses such as college tuition, a renovation project or want to use the funds for debt consolidation, then keeping the same term or extending it may be a better alternative.
[Read more...]
