On Monday of this week, mortgage rates fell to the lowest level on record, giving consumers added incentive to lock in low payments for home purchases and refinance loans.  The average rate for 30-year fixed loans sank to 4.69%, from 4.75% last week, mortgage company Freddie Mac reported Thursday.  That's the lowest point since Freddie Mac began tracking rates in April 1971.  Rates for 15-year and five-year mortgages also hit record lows. 

We all know refinancing can allow us to lower our monthly payment, but are there other reasons and strategies to consider when you refinance.

1. Lower term, same payment: If you want to pay off your home sooner or build equity faster, consider a loan term that will lower your rate and the term (years) of your loan, but leave the payment the same.  This will save you thousands of dollars in many cases, and accomplish your goal of being debt free much faster. 

2. Get Rid Of Mortgage Insurance:  If you had to pay mortgage insurance when you took out your loan or you have an FHA loan with mortgage insurance, you may be able to drop that monthly payment by refinancing.  Your opportunities here are going to be heavily dependent on your appraisal, so try to get some good info from a Realtor regarding value before paying for an appraisal.

3. Credit Situation May Have Improved:  Did you have some credit issues when you took out your first mortgage?  If things have improved or enough time has gone by for those items to be minimized, you may qualify for a better rate or terms for your loan. 

4. Combine 1^st and 2^nd Into One Payment:  We have many calls from people that currently have two mortgage payments that want to combine them into one payment.  That makes it easier, but there is some caution when refinancing for this reason.  Home values in most areas have either flattened or fallen, potentially making your home worth less in the market.  You may have taken out two mortgages to avoid paying mortgage insurance, and trying to combine into one loan without mortgage insurance will be dependent on the home appraising for an amount that shows 20% or more equity position.  That can be risky, so get some good info from a Realtor regarding value before paying for an appraisal.

5. Convert Interest Only, A.R.M.s, or Balloon Loans To Fixed:  If you have one of these types of loans, it may be very beneficial for you to investigate your options to refinance to a fixed rate mortgage that allows you to start building equity and avoid increases to your monthly payment in the future.

The key element in your research is finding a trusted loan professional to help you create a strategy that fits your present and future needs.  Give us a call at 1-888-562-6200.

The U.S. House of Representatives voted today to extend the closing deadline by three months to homebuyers who are trying to get the popular tax credit by the end of the month.  If the Senate passes the extension, it will give homebuyers who met the April 30 deadline of having a signed purchase agreement until September 30 to complete their purchases.  Homebuyers who have signed purchase agreements by April 30 currently have until Wednesday to close on the purchase to qualify for the tax credit.  The Senate still has to approve the measure before President Barack Obama can sign it into law.

If you are like most people, you do not have a lot of experience with comparing loan proposals from mortgage lenders.  Most people will receive a proposal of costs given by a loan officer, look at the bottom line figure, and assume these are all the costs.  Unfortunately, some loan officers count on a borrower’s inexperience and will show only a portion of the actual costs needed at closing.  This makes their costs look lower when in actuality they are only incomplete. 

Why do they do this?  Usually there are two main reasons this happens; you are dealing with an inexperienced loan officer, or an opportunistic loan officer that thinks it is fine to capitalize on the lack of experience of their customer.  Whole marketing campaigns have been designed to appeal to people that don’t know what they are doing and don’t have the time to learn about the process.  Our focus at Churchill is to help you understand your mortgage, not manipulate the information for our benefit.  That is just bad business.

Here is what you need to know.

Before January of 2010, loan officers would send out Good Faith Estimates (GFEs) to customers upon request, and sometimes they would send out multiple GFEs.  In 2010, the Department of Housing and Urban Development (HUD) mandated new restrictions for the sending of a GFE that made the GFE costs a contract as opposed to an actual estimate.  This means if a loan officer sends you a Good Faith Estimate and you do not have a property selected, they may be held to the costs shown on the GFE.  For example, you ask about a $100,000 home but end up buying a $170,000 home.  The costs to do the loan will be significantly higher on the $170,000 home, but because the loan officer gave a GFE, they may be forced to take a loss on the loan because costs were quoted on a $100,000 loan amount.  It is a very different world for loan officers because of this change, and therefore you will most likely receive a Loan Proposal of costs or a Transaction Summary of costs. 

When a GFE can be provided:  Most costs associated with purchasing your real estate are not controlled by the lender.  These include expenses such as attorney fees, title insurance, survey, recording fees, appraisal, and termite inspection.  These are costs which anyone will be required to pay when purchasing a home regardless of loan amount or lender.  All of these expenses are provided by independent professionals who are not affiliated with your prospective mortgage lender.  It can be very confusing if you compare these expenses item by item to estimates prepared by different lenders.  Based upon individual experience, each loan officer will offer their best estimate as to what each of these costs may be and there will be some differences between individual loan officers.  When your loan officer prepares the good faith estimate, they will also include an estimate for establishing your escrow account for the future payment of taxes, insurance, and mortgage insurance (often referred to as pre-paids).  Property taxes are set by the appropriate government taxing authority.  Unfortunately, property taxes are not negotiable.

Premiums for homeowners insurance are set by the insurance company you select.  All mortgage lenders will require that you pay your first year homeowners’ insurance plus two additional months at closing.  All lenders work off of a schedule based upon the time of year that you close in determining how much is placed into the escrow account at the time of closing to evaluate how many months of property taxes need to be set aside.  For this reason, your total costs for setting up your escrow accounts will vary between lenders.  The regulatory agencies (Fannie Mae) only require you to disclose 2 months property taxes for escrow.  But, depending on when your closing is scheduled, you may be required to pre-pay up to 11 months of property taxes.  Again, based upon individual experience, each loan officer will offer what they believe is a reasonable estimate of your monthly taxes and homeowners insurance.  

The most accurate method to compare loan proposals (in terms of closing expenses) is to review the specific fees in the proposal or from block one in the GFE, such as: Origination Fee, Underwriting Fees, Tax Service Fees, etc.  All lenders will offer a different set of scheduled fees and each has a tendency to establish unique names for each of these fees.  It is important to make sure you obtain all of these loan charges and fees.  You should also compare discount points charged by various lenders in block two if you are considering advance payment to reduce your interest rate.  Discount points may be paid at closing to reduce the interest rate of your loan over the term of your mortgage.

If you could use some good advice about choosing the right loan or comparing closing costs, we would be happy to assist you.  Call us at 1-888-562-6200 or Request A Call Back on our website http://www.churchillmortgage.com/ and we will contact you at a time that is convenient for you.

Private Mortgage Insurance is required for most loans that exceed a loan to value of 80%.  It insures the Lender in the event that you default on your mortgage payment and the lender is forced to sell your property at a loss.  Mortgage Insurance benefits the Buyer because it allows you to put less than 20% down – sometimes as little as no money down.  Without mortgage insurance, this would not be possible with A+ interest rates.  It used to be that a borrower had to pay as much as 1% of the loan amount up front and then pay a significant amount each month.  Mortgage insurance companies now offer plans which require a very small amount at closing together with a regularly scheduled payment each month.  Deciding whether you should liquidate some assets to use as additional down payment (to avoid the cost of mortgage insurance) requires that you evaluate what you lose by liquidating those assets.  Many clients find that paying other debts is better than applying additional cash towards the down payment.  Paying off credit cards and car loans may improve cash flow more than avoiding Private Mortgage Insurance.  Private Mortgage Insurance is a tool, and like any other tool you need to evaluate the pros and cons before making a decision. 

Churchill Mortgage would be happy to assist you in comparing a program with PMI vs. without to help you make the best decision. Contact one of our Home Loan Specialist at 1-888-562-6200 or Request A Call Back on our website www.churchillmortgage.com and we will contact you at a time that is convenient for you.