The FHA Streamline Refinance Program Is a Hit

The home mortgage refinance boom is still plugging along full-steam. One reason for the continuing high number of refinance transactions, in addition to the continuing low interest rates, is the growing popularity of the FHA Streamline Refinance program.

Many homeowners are learning about and taking advantage of this fast and low cost method of refinancing their home loan. Many others have still not heard about or understood the program. The FHA Streamline Refinance loans are primarily for homeowners who currently have an FHA mortgage on their residence  a loan insured by the Dept. of Housing and Urban Development (HUD). The streamline program makes it possible to obtain a lower interest refinance loan in a very simple, fast and low-cost procedure.

In fact, homeowners do not need to re-qualify for the FHA Streamline Refinance loan. There’s no need for another appraisal (unless the closing costs are added to the balance). There’s also no need for a credit report or asset verification. Cash is not needed for closing. Most of the heavy mortgage application paper work was all completed and accepted when the initial FHA loan was granted. In most cases, this refinance loan is available with very limited documentation and minimal underwriting qualifications.

The FHA’s rationale is something like this: If the homeowner is current with their existing mortgage — with payments up-to-date and a record of being paid on time — the owner is obviously a good credit risk. So why go through all the qualifying paperwork again? With a good record of payment, the owner should be in an even better position to maintain a positive payment record when he is given the new refinance loan, resulting in a lower interest rate and lower monthly payments.

For more information, related to your own situation, contact any FHA approved mortgage lender.

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Mortgage lock-ins confuse consumers

Mortgage rate lock-ins are confusing to many consumers when they’re applying for a mortgage to finance the purchase of a home or refinancing an existing loan. An interest rate lock-in is simply a lender’s promise to hold a certain rate for a specified period of time while the loan application is being processed. Typically, a rate is locked-in from 30 to 90 days, but it could be a shorter or longer period.

It should be noted that a lock-in is not the same as a loan commitment. A loan commitment is the lender’s promise to make a loan in a specified amount at a future time. In most cases, such a commitment is offered after the application has been approved. The interest rate lock-in period should be long enough to cover the average time for processing loans in the local area. Also, any special factors that might delay the settlement of the loan should be considered.

The lock-in is important to the consumer because it provides assurance that the interest rate will not increase while the loan application is being processed  while work is underway to prepare, document and evaluate the loan application. In some cases, the lender charges a fee for the lock-in. And often that fee is nonrefundable.

Reasonable lock-in fees is a justified method for a lender to protect his financial interests, said Michael Levy, president-CEO of Home Savings Mortgage, a mortgage banking firm based in Oxnard, Calif.. Considerable time is expended by the lender’s staff during the processing procedure, and not all loans are accepted and closed. However, our firm generally does not charge such fees.

The lock-in works well for consumers when the prevailing interest rate creeps up while the loan is being processed. But when rates lower a bit during that period, some applicants start shopping for another loan with other lenders. In cases where interest rates have dropped during the lock-in period, it’s in the consumer’s best interest to discuss a possible lowering of the rate with the lender processing the loan. An adjustment in the rate can often be arranged.

When applying for a mortgage loan and determining the timing and length of a rate lock-in period, there are many personal factors that should be considered. It’s important to discuss it in detail with a loan officer.

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$3 Trillion in mortgage loans this year!

A whopping $3 trillion in mortgage loans will be written this year. That’s the forecast from the Mortgage Bankers Association of America.

That would beat last year’s record-setting mortgage origination volume by more than half a trillion dollars. About $1.95 trillion of that total, or 65 percent, will be due to mortgage refinancing loans, MBA predicts.

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Summertime: Home buying and financing time

The summer months are by far the most popular season for families with kids to buy and finance a home and move from one community to another. They want to settle in to their new residence before the new school year starts.

Moving can be a very turbulent experience for children. They’re leaving friends and a familiar community and entering into totally unfamiliar territory. Here they’re often apprehensive about making new friends and entering a new school environment. This can be quite traumatic for youngsters. Parents can be a big help in their kids adjustment to a new community and routine. Here are a few specific suggestions:

— Take your kids with you on one or several pre-move trips to your new community. Visit points of interest for the kids, such as their new school, the close-by library, sports stadium even a pizzeria. Give them something to look forward to.

— Contact appropriate organizations in the new community and schedule your child for participation in a library function, sports league, art class or other community activity. Such participation allows the child and parents to make new friends quickly and easily, sharing common interests and forming positive relationships.

— Visit the new school as a family to meet with administrators and teachers and learn about the school’s schedule and general layout.

These steps were suggested by Nan Jesperson, a relocation expert working with RE/MAX Real Estate. She recently consulted with psychologist Thomas T. Olkowski in producing a video made for kids by kids. The video, titled Kids Survival Guide to Moving is available via the firm’s Web site: www.remax.com.

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Growing motivation to own a home

Homeownership has always been important to most families, but never more so than it is today. Owning a home gives an individual or family a sense of pride. They’re not just temporarily renting a shelter for themselves. It’s their property. They can make changes and improvements in ways that meet their personal tastes. And they can live there as long as they want, assuming they keep current on mortgage and tax payments.

Today, there are more motivating factors pulling people into ownership. Increasingly, owning a home and building equity is a family’s primary source of accumulating wealth. Many people now have a new and stronger appreciation of the investment value of owning a home since the stock market has been sliding down precariously.

Currently, about two-third of American households own their home. For three-fourths of those owners, their homeownership is now the major portion of their total wealth, according to a recent study by the National Association of Realtors. Many homeowners now use their home when making important financial decisions. The growth of equity in those residential properties provide owners with access to cash for emergencies as well as for the purchase of big-ticket items.

Also, that equity build-up often provides the down payment and closing costs for a subsequent purchase of a larger, more expensive home when family growth or business status generates such a need. About 76 percent of homeowners responding to the NAR survey said they used all the equity in a former home for the down payment on a new residence. Another 10 percent put some of their equity back into their new home. By investing the accumulated equity in a larger home, these families improved their standard of living and increased their potential for building even greater household wealth.

The survey revealed the average homeowner now has about $50,000 in equity. Of course, higher income households and owners of homes in exceptionally high priced areas usually have much equity than that. Those with incomes greater than $75,000 per year typically have about $100,000 in equity. As would be expected, senior homeowners (those age 50 and older) tend to have more equity in their homes. Their median level of equity, nationally, is about $80,000. Households younger than age 40 have a median equity of $35,000, according to NAR.

About 16 percent of homeowners have significantly changed their spending or saving behavior as a result of their growing equity. They depend more on this forced saving vehicle, and it works well. A study by the Federal Reserve also indicates that an increasing number of holders in stock equity have changed their spending or saving behavior. And in many cases, they changed from depending on stock yields to equity in their home or other forms of real estate investing.

Three out of four respondents to the NAR survey indicated they now have more wealth in their home than in a stock market portfolio. This is largely due to substantial appreciation (growth) in property values, and declining yields in stocks. When homeowners need cash, the most common method is to tap their equity with a home equity loan or a second mortgage. Half of homeowners today use these methods. About 22 percent pulled cash out of their home when they refinanced their mortgage.

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Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends, carried in about 230 U.S. newspapers. He also writes freelance features on real estate related subjects.

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