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Mortgage rates at record low, Silicon Valley refinancing applications surge
By Sue McAllister
Mercury News
Posted: 03/26/2009 06:17:27 PM PDT
Mortgage rates dropped to a record low this week, stoking a surge in refinance applications in the South Bay as homeowners look to take advantage of some of the best loan deals in nearly 40 years.
The national average interest rate for 30-year home loans fell to just 4.85 percent this week from 4.98 percent last week, Freddie Mac said Thursday. That's the lowest ever recorded by the government-backed mortgage financing company, whose data goes back to 1971. The previous record low was set in mid-January, when rates fell to 4.96 percent. Average rates are those for "conforming" loans, up to $417,000.
Experts say rates are likely to stay low for the rest of the year, perhaps providing a much-needed balm for the wounded housing market.
Even in Silicon Valley, where residents need bigger loans to buy in the area's more expensive neighborhoods, news of the low rates is spurring loan applications, local mortgage industry professionals said.
"I am busier right now than I was all of last year," said Todd Flesner, a broker with Stern Mortgage in Palo Alto, "due primarily to low interest rates and the correction in values on home purchases."
With home prices down from last year, he's got several first-time clients purchasing homes in the $500,000-and-under price range in San Jose.
Similarly, Chris Amsden, owner of Golden State Lending in Los Gatos, said he's seen a surge of loan applications in the past two weeks. Sixty-five percent
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are for refinances, he said, and the rest are for purchases. Most of those purchasing are seeking foreclosures or short sales, he said.
Interest also spiked as measured by Zillow.com. At the real estate site's Mortgage Marketplace, there were 7,868 requests for loan quotes from March 12-18, and 21,841 requests from March 19-25, just as rates dived to 5 percent and lower.
A lack of equity
But despite the good news about low rates, obstacles remain for many local homeowners who want to refinance. Loans are generally available only to those who have at least 20 percent equity in their homes. And with home values falling, fewer people have the equity needed to refinance. Also, while rates for conforming loans and so-called "jumbo conforming loans" ($417,000 to $729,750), are at or near record lows, rates for loans even bigger than that remain at an average of 6.66 percent this week, according to Bankrate.com.
The recent drop in rates occurred after the Federal Reserve announced plans last week to buy more than $1 trillion worth of Treasury bonds and mortgage-backed securities from Freddie Mac and its sister company Fannie Mae, in an effort to keep mortgage rates attractive and bolster the weak housing market.
Rates dropped sharply on the news last week, although they have ticked upward slightly since then. (Freddie Mac's report provides an average rate for the seven days ending Thursday.)
For borrowers willing to pay a point up front, rates for loans of up to $417,000 were about 4.75 percent Thursday, Flesner said. And for jumbo conforming, rates were about 5.125 percent with 1 point paid.
A point is equal to 1 percent of the loan's principal; some borrowers opt to pay points in exchange for lower interest rates. In the Freddie Mac survey, borrowers paid an average seven-tenths of a point on the record-low average 4.85 percent interest rate.
The Fed's announcement nearly assures that rates will stay low, said Greg McBride, senior financial analyst with Bankrate.com.
"By purchasing mortgage debt and Treasuries over the remainder of the year, the Fed is going to keep a lid on mortgage rates for the remainder of the year. Low mortgage rates for as far as the eye can see is what's needed to bring buyers back to the market," he said.
Refinance, refinance
The mortgage market is being dominated by refinance transactions, according to the Mortgage Bankers Association. In its most recent weekly survey, for the week ended March 20, nearly four out of five mortgage applications nationwide were for refinance transactions. Refinance applications increased 42 percent compared with the previous week, the trade group said.
Arlene Allert, Bay Area regional manager for Wells Fargo Home Loans, urges homeowners to consider their long-term financial goals and research various loan products available before deciding to refinance.
"A lot of people over the last few years got into a culture of 'the rates are down, I'm going to refinance,' " she said. "A lot of people ended up in products that maybe weren't the best for them."
Allert added that the Obama administration's new refinancing and loan modification programs, dubbed Making Home Affordable, should help some "underwater" homeowners — those who owe more than their homes are worth — when the programs are up and running. She wasn't sure when Wells Fargo will begin helping customers navigate the options available through Making Home Affordable, but said the bank was "working diligently" on a process that will help customers quickly gauge whether they qualify for refinancing or loan modification.
Friday, March 27, 2009
Thursday, March 26, 2009
Refinancing Your House Can Save Oodles of Money
Refinancing Your House Can Save Oodles of Money
(Rochester, N.Y.) Howard Haims is a financial planner. After advising many clients to refinance their mortgages, he took the plunge himself. "We were very fortunate to lock in at a rate under 5 percent. The day it dropped, she locked us in,” he said.
Haims originally bought his home two and a half years ago, but he locked in the new rate a-point- and-a-half lower, saving $350 a month.
"There's plenty of money around Rochester. The rates are low; it’s a great time to refinance," said Chris Stevens of Premium Mortgage.
You could easily consider a refinancing if you answer “Yes” to one of more of these four questions.
1- Is my interest rate over 6 percent?
2- Do I plan to stay in my home for more than a few years?
3- Is it time to trade my adjustable rate to lock in a low fixed rate?
4- Do I want to cash out the equity in my home to consolidate other debt?
The combination of lower interest rates and bailout money to banks appears to be working to stimulate the economy.
In just one week, refinancing applications surged 42 percent. What’s different this time is that now banks are doing more to scrutinize potential customers.
Haims said, "This time we need to see tax returns, investment statements…do a full credit check. The pendulum has really swung…in just two years."
Those who want that 5 percent rate should check their credit score. Two years ago, a credit score of 620 made the cut. Now anyone below 740 will likely pay a new fee--$750 for every 100,000 borrowed.
Some people may have better luck with a smaller, regional bank.
"Our people know the local market,” said Christopher Spaker of Canandaigua National Bank. “If something doesn't quite fit, we can make an exception based on certain scenarios and a common sense approach."
Larger national banks have created standards based on what's happening across the country, in markets where housing values haven't been as stable as they are in Rochester.
http://www.13wham.com/news/local/story/Refinancing-Your-House-Can-Save-Oodles-of-Money/STIG0U23Lk24i4KJcRlVXw.cspx
(Rochester, N.Y.) Howard Haims is a financial planner. After advising many clients to refinance their mortgages, he took the plunge himself. "We were very fortunate to lock in at a rate under 5 percent. The day it dropped, she locked us in,” he said.
Haims originally bought his home two and a half years ago, but he locked in the new rate a-point- and-a-half lower, saving $350 a month.
"There's plenty of money around Rochester. The rates are low; it’s a great time to refinance," said Chris Stevens of Premium Mortgage.
You could easily consider a refinancing if you answer “Yes” to one of more of these four questions.
1- Is my interest rate over 6 percent?
2- Do I plan to stay in my home for more than a few years?
3- Is it time to trade my adjustable rate to lock in a low fixed rate?
4- Do I want to cash out the equity in my home to consolidate other debt?
The combination of lower interest rates and bailout money to banks appears to be working to stimulate the economy.
In just one week, refinancing applications surged 42 percent. What’s different this time is that now banks are doing more to scrutinize potential customers.
Haims said, "This time we need to see tax returns, investment statements…do a full credit check. The pendulum has really swung…in just two years."
Those who want that 5 percent rate should check their credit score. Two years ago, a credit score of 620 made the cut. Now anyone below 740 will likely pay a new fee--$750 for every 100,000 borrowed.
Some people may have better luck with a smaller, regional bank.
"Our people know the local market,” said Christopher Spaker of Canandaigua National Bank. “If something doesn't quite fit, we can make an exception based on certain scenarios and a common sense approach."
Larger national banks have created standards based on what's happening across the country, in markets where housing values haven't been as stable as they are in Rochester.
http://www.13wham.com/news/local/story/Refinancing-Your-House-Can-Save-Oodles-of-Money/STIG0U23Lk24i4KJcRlVXw.cspx
Refinancing Boom Isn't for Everyone
Refinancing
People are pinching their pennies in this recession, but now may be the time to look for a house or refinance the one you own. The Utah average on a 30-year fixed rate mortgage is back up to 5.4% according to Bankrate.com. That's a low rate but the business has changed.
Home ownership is looking like a good deal again. There are a lot of houses for sale, prices have gone down and interest rates are low.
"They had some pieces and I told them I just wanted bigger dimensions," said Jennifer Burt as she showed us around her Riverton house. She locked in a rate of 4.6% not long ago with the same loan company she was already paying. It seemed like a simple refinance, but as time was running out on the rate, there were complications.
"Once we got through underwriting, they changed their mind and said, 'Oh by the way, we want a full blown appraisal.' So, we had to pay a second appraisal fee, so we were charged for two appraisal fees," she said.
Delays, stricter requirements, and last minute employment verification seem to be the norm in the financing business these days. Lance Miller finds loans for people and trains loan officers. He says the free-wheeling days of a few years ago are over.
"The problem is credit scores affect your rate a lot more than they used to, so if you have a score below 740 on a conventional loan, your rate goes up," according to Miller. He says fewer than half of all Americans meet that mark and there are no more programs for people with bad credit. And very few loans for the self-employed whose income isn't consistent.
"Lenders are extremely scared of writing a loan they have to take back," said Miller.
Jennifer Burt thinks it's unfortunate people with good credit are paying for other's mistakes.
"You understand why. Obviously, if they had been cautious in the first place, none of this would have happened," Burt said.
People are running into problems with their credit scores or they don't have enough equity in their home anymore. Experts say to also pay attention to run-away fees. Some lenders are trying to pad their bottom line, by taking more money from the consumer up front.
People are pinching their pennies in this recession, but now may be the time to look for a house or refinance the one you own. The Utah average on a 30-year fixed rate mortgage is back up to 5.4% according to Bankrate.com. That's a low rate but the business has changed.
Home ownership is looking like a good deal again. There are a lot of houses for sale, prices have gone down and interest rates are low.
"They had some pieces and I told them I just wanted bigger dimensions," said Jennifer Burt as she showed us around her Riverton house. She locked in a rate of 4.6% not long ago with the same loan company she was already paying. It seemed like a simple refinance, but as time was running out on the rate, there were complications.
"Once we got through underwriting, they changed their mind and said, 'Oh by the way, we want a full blown appraisal.' So, we had to pay a second appraisal fee, so we were charged for two appraisal fees," she said.
Delays, stricter requirements, and last minute employment verification seem to be the norm in the financing business these days. Lance Miller finds loans for people and trains loan officers. He says the free-wheeling days of a few years ago are over.
"The problem is credit scores affect your rate a lot more than they used to, so if you have a score below 740 on a conventional loan, your rate goes up," according to Miller. He says fewer than half of all Americans meet that mark and there are no more programs for people with bad credit. And very few loans for the self-employed whose income isn't consistent.
"Lenders are extremely scared of writing a loan they have to take back," said Miller.
Jennifer Burt thinks it's unfortunate people with good credit are paying for other's mistakes.
"You understand why. Obviously, if they had been cautious in the first place, none of this would have happened," Burt said.
People are running into problems with their credit scores or they don't have enough equity in their home anymore. Experts say to also pay attention to run-away fees. Some lenders are trying to pad their bottom line, by taking more money from the consumer up front.
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