Home Mortgage Refinance In Today's Market Is Challenging


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

Each mortgage company has the choice to offer their service portfolio a government stimulus refinance program from the U.S. Dept of Treasury called the "Making Home Affordable" Plan. This mortgage loan package allows home mortgage refinance with property valuation from the lender's automated valuation process and also allows underwriting guidelines with a higher debt to income ratio than normally 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 approach is beneficial to homeowners who have suffered the loss of a portion of their earnings and/or devaluation of their home due to general economic conditions. This product offers help to property owners who have gone delinquent in their monthly mortgage payments.

What the Plan Will Not Allow:

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

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

The refinance must show a benefit to the property owner by lowering interest rate and payment or taking the customer from an ARM or pay option ARM to a fixed plan.

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

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

The stimulus refinance product refers 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 economic atmosphere of declining market values and rampant employment 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 substantial savings every month 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 monthly payment, but a borrower should plan to remain in the house long enough to recoup the cost of the points paid. Each point represents 1% of the loan amount. The costs to close the loan may be rolled into the loan and refinanced as well so that no out of pocket expense will be paid 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 property owner 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 homeowner set up their home mortgage refinance on a 30 year term, but make the monthly payment based on the payment for the term they wish.

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