It is a great time to get a new low or refinance and older loan. Don’t wait too long!

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WASHINGTON (AP) — Rates on 30-year mortgages tied a record low this week, spurring refinancing activity as the troubled housing market moves closer to possibly hitting the bottom, Freddie Mac said Thursday.

Average rates on 30-year fixed mortgages, the most popular loan among home buyers, slid to 4.78 percent from 4.8 percent last week, Freddie Mac said. Last year at this time, the average rate on a 30-year mortgage was 6.06 percent.

The all-time low of 4.78 percent was recorded the week of April 2. Freddie Mac’s annual survey dates back to 1971.

Low mortgage rates have led to more refinancing activity since rates first fell dramatically in the winter. Rates slid again after the Federal Reserve said last month it would buy $1.2 trillion in mortgage-backed securities and $300 billion in long-term government debt, which traditionally influences rates on 30-year home loans.

Frank Nothaft, Freddie Mac’s chief economist, said the low rate means that those who refinance a $200,000 loan would save almost $212 in monthly mortgage payments and more than $2,500 per year.

Borrowers who refinanced during this year’s first quarter reduced their mortgage payments by about $2.5 billion over the coming year, and half of borrowers who refinanced lowered their annual interest rate by at least 20 percent, according to Freddie Mac’s quarterly Refinance Report.

With inventories apparently dropping and affordability rising, there are some positive signs, Freddie Mac said.

“The housing market may be edging toward a bottom,” Nothaft said.

Freddie Mac also said the average rate on a 15-year fixed-rate mortgage was 4.48 percent this week, unchanged for the third straight week.

Rates on five-year, adjustable-rate mortgages fell to 4.80 percent from 4.85 percent last week — the lowest since Freddie Mac began tracking it in January 2005.

Average rates on one-year, adjustable-rate mortgages fell to 4.77 percent from 4.82 percent last week.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for every type of mortgage mentioned in Freddie Mac’s survey except for the five-year adjustable rate mortgage, which averaged 0.6 point.

Freddie Mac collects mortgage rates from lenders around the country. Rates can fluctuate significantly.

Bruce Norris, real estate expert from California now is an Amazing time to buy a home.

Interest rates have never been so low.

One of the most important factors in qualifying for an FHA home loan is the debt-to-income ratio.  In this post I will explain this so you can be aware of your own debt-to-income ratio and make sure it is where you need to qualify for an FHA loan.

There are 2 different important ratios FHA underwriters look at when approving a FHA loan.  The first is your housing ratio or “front ratio”.   This is simply taking your TOTAL housing payment (monthly mortgage payment + monthly mortgage insurance + property taxes divided by 12 + homeowners insurance divided by 12 + monthly condo HOA if you have it) as a percentage as your total gross (before tax) monthly income.  So if your total housing payment is $2,000 per month and your gross monthly income is $6,0000, $2,000/$6,000=33%.  So your housing ratio is 33%. 

The more important ratio looked at for qualification for an FHA loan is your “back-end ratio”.  This is your total housing payment + all the total of all other monthly payments that show up on your credit as a percentage of your gross income.  So if you have a housing payment of $2,000 + a $200 auto loan payment + $100 student loan payment + $50 minimum monthly credit card payment, your total debt for the purposes of the back-end ratio would be $2,350.  So take $2,350 and divide it by $6,000 gross income and you have a 39% back-end ratio.   Items such as utilities, car insurance, cell phone payment, etc… are NOT counted in this ratio.  It is only your total housing payment + items that appear on your credit (most commonly auto loans, student loans and credit cards, personal loans). 

So in this case a 33% front ratio and a 39% back ratio would qualify for an FHA home loan as long as the borrower meets all of the other guidelines (job history, credit score).   The maximum ratios can be much lower for what is called a “manual underwrite”.  A manual underwrite is generally done only if you have below a 580 credit score.  In this case you have to start out with a 31% maximum housing ratio and a 43% back ratio.  The underwriter does have wiggle room if you have compensating factors.

But if you have average to good credit, the maximum ratios can be much higher than 31/43 above.  Generally you can get up to 50% back-end ratio and possibly above if you have other compensating factors (solid credit, cash reserves).   But regardless of the maximum ratios, the most important thing for your as a homeowner is only taking on a housing payment that you feel you can comfortably afford.

Some tips to keep in mind if you feel like your debt-to-income ratio for a FHA home loan is too high for the house you want to buy or on the borderline:

• Try to buy your auto with cash or pay it off early so you remove that payment from your debt-to-income ratio calculation
• You might be able to refinace your auto loan to lower your payment or auto loan interest rate
• Try to pay off your credit cards and either carry a small balance or none at all
• See if you can get your student loan payments deferred for 12 mos or more (then these payments do not have to be included in your DTI).  But keep in mind that you will have to make these payments eventually, so only take on a housing payment that will allow you to do this in the future

I hope this article helps you in your financial planning to become a homeowner.  Please give us a call or email if you have more questions or would like a free pre-approval for an FHA home loan.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer and FHA specialist

858-922-7899

rob@affinity-financial.com

hmmm. Twitter screwed up the link.

Please click here to Apply for an FHA Loan

I’ve always thought it incredibly financially intelligent for a new home buyer just getting started to buy a 2-4 unit property as a their primary residence and then live in one of the units and rent out the others.  This way a large part of your total housing payment can be offset by the rental income you collect  from your tenants.  And as you move a long in life and become more financially robust, you can move out of the 2-4 unit property to buy a single-family home, but still retain the 2-4 unit as an investment property that will provide you cash flow and future equity growth.

In this article I’m going to discuss a specific niche within this idea of buying a 2-4 units property as a primary residence.  This is to buy a duplex that requires updating with the special FHA 203k fixer-upper loan.  A duplex is especially interesting because you can buy it with only 3.5% down payment with an FHA loan if you occupy it as your primary residence.  You can also get the same record low FHA home loan 30 year fixed interest rates on a duplex as you can on a single-family or condo.  Whereas if you buy a triplex or fourplex as a primary residence with an FHA loan you need to put 15% down, and the interest rates are not quite as favorable.  Additionally, using a FHA 203k rehab loan you can get a great deal on a duplex that may be overlooked by other buyers in the market becuase it needs work, but then you can go in and fix it up with this special loan thus creating equity.

I have another article that I have written on this web site describing the FHA 203k rehab loan, but here is a quick review of the highlights:

• Property has to be your primary residence
• The lender will lend you the cost to purchase PLUS the cost the renovate all in one loan
• When you close your new FHA loan will pay off the seller and then the funds to renovate will stay in an escrow account to be drawn upon when you need them
• 3.5% down payment is required, but that can be a gift from a relative or lifelong friend

Another reason using the FHA 203k rehab loan can be really effective is that it can enable you to be able to get mortgage financing on a property that wouldn’t qualify for a regular FHA or conventional loan because of the property condition.  Because this property won’t qualify for regular financing, you are in position to negotiate a big discount with the seller, because the seller does not have as many buyers to sell it to.  Then you can go in and make the improvements for much less than the discount you recieved from the seller and build a nice chunk of equity.

The best way to get started on a FHA 203k loan is to first get pre-approved.  The next step is to start searching for properties.  Once you find a property that you would like to make an offer on, it is best to find a contractor that can walk through the property with you and put together a cost break-down of what you are planning to fix and the labor and material costs associated with that.   Most of the time it’s best to stick with fixing cosmetic items such as painting the interior and exterior, updating the kitchen and bathrooms and putting in new flooring for example.  Those are the most cost effective while at the same time adding the most to your properties value.

In summary, I believe buying a duplex as your primary residence and using a FHA 203k rehab loan to purchase and renovate can be a very smart financial decision.  If you have any questions, feel free to call or email me, my contact info is below.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer and FHA specialist

858-922-7899 (direct)

rob@affinity-financial.com

A large percentage of the home loans in the United States today are owned by Fannie Mae and Freddie Mac.  If your loan is owned by one them, you have a tremendous opportunity to refinance into record low 30 year fixed rates. 

The first step is the look up if your loan is owned by Fannie Mae or Freddie Mac.  Even if you make your payments to Countrywide, Wells Fargo, or any other loan servicer, your loan still might be owned by Fannie Mae or Freddie Mac.  So step #1 is to go to these sites and look up your loan.

http://loanlookup.fanniemae.com/loanlookup/

https://ww3.freddiemac.com/corporate/

If your loan is held by Fannie Mae I can assist your with a refinance.  Here are some highlights:

• You can refinance up to 105% of your current property value and there is NO mortgage insurance if you don’t already have it
• You can re-subordinate existing 2nd mortgages to the new 1st mortgage
• You can refinance primary residences, 2nd homes and investment properties
• You have to be current on your mortgage payments to qualify, but there is no minimum credit score associated with the program

This is a good opportunity to refiance from a ARM into a stable 30 year fixed loan, or lower your interest rate on a 30 year fixed to current market rates and not have mortgage insurance.   This is especially exciting because even if your property value has declined, you can still refinance with the very best rates with this program.

Rob Chomentowski

Sr. Loan Officer

858-922-7899 (direct)

rob@affinity-financial.com

With 30 year interest rates falling once again to incredibly low levels, this is a great time to think about lowering your interest rate with a FHA loan streamline refinance.  Here are some highlights of the FHA streamline refinance:

• You have to be already in a FHA loan to do a FHA streamline refinance (but if you are not in an FHA loan you can still refinance into an FHA loan, please conact for details)
• You do not need to get an appraisal
• You do not need to provide ANY income documentation
• This loan does not require a credit report

So the FHA streamline refinance can be a very painless way to drop yourself into a lower interest rate and lower your mortgage payment.  In many cases you can complete a FHA streamline refinance with zero out-of-pocket costs.  So you can drop your monthly mortgage payment without any out of pocket expenses.  FHA does require 1.5% up front mortgage insurance that can be rolled into the new loan.

Here are the items to have prepapred to complete a FHA streamline loan:

1. Original deed of trust (should be part of the original documents signed when you purchased)
2. Original HUD 1 settlement statement from when your purchased (should be part of the original documents signed when you purchased)
3. You most recent mortgage statement
4. Copy of your existing note (should be part of the original documents signed when you purchased)
5. Homeowners insurance declaration page
6. Photocopy of drivers license and social security card

We can also assist you in gathering items 1,2 and 3 if you provide us with the contact information of the escrow company that handled your original closing. 

So these are all the only items we need and we can drop you right away into a much lower interest rate fixed for 30 years and saving your tens of thousands in interest over the life of your FHA loan.  Please email or call below if you have any further questions.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer and FHA home loan specialist

858-922-7899 (direct)

rob@affinity-financial.com