Mortgage Loan Refinance Today Is Challenging



A thirty year fixed home mortgage refinance is currently priced from 4.750% and 5.250% charging the borrower minimal or no points for a Rate and Term refinance. The rates fluctuate daily for home mortgages depending on market conditions, but haven't deviated from this range since April 2009.

Each bank has the advantage to offer their service portfolio a government stimulus refinance program from the U.S. Department of Treasury called the "Making Home Affordable" Plan. This mortgage loan program allows home mortgage refinance with property valuation from the lender's automated valuation process and also allows qualifying with a higher debt to income ratio than generally allowed.

The stimulus refinance program refers to the refinance of 30/20/15/10 year fixed mortgages. Some lenders added the 5/7/10 year ARMs.

This program is beneficial for borrowers who have suffered the loss of a percentage of their income and/or devaluation of their property due to general economic conditions. This package offers assistance to borrowers who have fallen behind in their monthly mortgage payments.

What the Plan Will Not Allow:

The automated valuation cannot show the home value over 105% of the current loan amount, 110% in certain cases.

The borrower must be employed and cannot have become self-employed in the last 24 months.

The refinance must show a benefit to the borrower by lowering rate and payment or taking the borrower from an adjustable rate mortgage or pay option ARM to a fixed plan.

*Also note the program will not allow a borrower to refinance home equity lines of credit. Second mortgages are subordinated to allow the refinance to proceed.

When refinancing your mortgage, requesting your current lender's version of the "Making Home Affordable" plan should be enough to let your lender know the specific program you're interesting in exploring.

The stimulus refinance program pertains to the refinance of 30/20/15/10 year fixed mortgages. Some lenders added the 5/7/10 year adjustable rate mortgages. The mortgage loan is basically a streamline refinance, but with the added advantage of no appraisal. In this financial atmosphere of declining market values and rampant job losses, it allows a lower monthly payment and a substantial monthly savings.

Government VA and FHA home loans still allow the Interest Rate Reduction Loans with no appraisal except under certain circumstances. Borrowers currently in an FHA or VA loan should use this option as the stimulus plan cannot make the change from a government loan to a conventional conforming program. Government loan rates are comparable to conventional conforming rates. Both translate to sizable monthly savings for most refinanced mortgages with rates around 5% from a median 6.5% a year ago.

Buying down the rate will allow an even lower rate, but a borrower should plan to remain in the home long enough to recoup the cost of the points paid. Each point represents 1% of the loan amount. The closing costs may be added into the loan and refinanced as well so that no out of pocket charges will be incurred by the borrower.

Rates for loans less than a 30 year term are not as low. It appears lenders are more interested in locking in a long term borrower than short term ones. 3, 5 and 7 year adjustable rate mortgage loans give no measurable break in interest rate from a 30 year fixed. It is suggested a borrower set up their home mortgage refinance on a 30 year term, but make the payment based on the payment for the term they wish.

Contact your current lender for information specific to your mortgage loan.

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