Refinance Mortgage Loans Hit Year High


Demand On Refinance Mortgage

Rates Continue To Drop
Gustan Cho Associates

Refinance Mortgage Loans is the hottest thing right now.  Many mortgage companies are swamped with homeowners trying to refinance their current mortgage loans at lower rates.  With the combination of mortgage rates being at a 23 month low and the reduction of FHA annual mortgage insurance premium, all refinance mortgage loan programs are in major demand.  Mortgage rates are now below 4.0% for prime borrowers on conventional loans.  Freddie Mac and Fannie Mae defines a prime borrower as a mortgage loan borrower with credit scores of 740 FICO credit scores and who have at least 80% loan to value.  Still, whether you are a prime borrower or a mortgage loan borrower with lower credit scores, mortgage rates are low across the board where you may take advantage of these lower mortgage rates and benefit by refinancing your current home loan.  Statistics released by Freddie Mac, homeowners wh have refinanced their mortgage loans in 2014 will save about five billion in interest on their mortgage loans in the first year of their refinanced mortgage loans.  A typical homeowner who refinances their home loans averages a 25% monthly savings.

Low Mortgage Rates In 23 Months

Per Freddie Mac Primary Mortgage Market Survey, also known as PMMS, the national average mortgage rates for a 30 year fixed rate mortgage loan has been under 4.0% for the past 20 consecutive weeks.  Refinance mortgages are cyclical and when mortgage rates drop, the volume of refinance mortgage applications increase.  As mortgage rates increase, the number of refinances drop.  When mortgage rates really increase, refinances are at a standstill like we have experienced back in May 2013.  According to national statistics by Freddie Mac, there were over 440,000 refinance mortgages on conventional loans last quarter.  This number is an 11% spike in the number of refinance mortgages from the prior quarter and marks the second consecutive quarter of a double digit increase in the refinance mortgage numbers.  Mortgage rates on the average has dropped more than 75 basis points since the beginning of 2014.  This type of drop can even benefit homeowners who purchased their homes in the past 12 months.  Each individual case is different but every homeowner should get a free analysis from a loan officer to see if they can benefit from a refinance mortgage.  Statistics announced by Ellie Mae revealed that refinance mortgage loans accounted for 40% of all closed mortgage loans a year ago and today, all refinance mortgage loans account for 60% of all closed mortgage loans.

Refinance Mortgage Loan Programs

Conventional mortgages lenders have closed on more conventional refinance mortgage loans last quarter than any other quarter since 2013.  Its not just conventional refinance mortgage loans that had surprising increases in refinance mortgage loans.  FHA mortgage loans, VA mortgage loans, and USDA refinance mortgage loans all have set record refinance mortgage loan closings as well.  With FHA, it was not just the drop in mortgage rates that spiked record number of FHA refinance mortgages.  FHA lowering the annual FHA mortgage insurance premium from 1.35% to 0.85% has created a flood of homeowners refinancing their FHA current mortgage loans.  Even if the FHA mortgage rates were the same, the reduction of the FHA mortgage insurance premium was just enough to benefit FHA refinance mortgage loan borrowers where they had a net tangible benefit, especially FHA mortgage loan borrowers with higher mortgage loan balances.

Rate And Term Refinance Mortgage

Majority of homeowners do a rate and term refinance mortgage when mortgage rates drop to lower their monthly mortgage payments and save thousands of dollars over the course of their mortgage loan term.  Rate and term refinance mortgage is done by reducing the mortgage rate or reducing the term of the mortgage loan or the combination of both of these.  If the homeowner gets a reduction of 200 basis points on their current home loan, that will be a reduction of a third of their payment.  In order to be able to go through a refinance mortgage by law, the homeowner needs to have a net tangible benefit of at least 5% in reduction of their monthly housing payment.

Refinance Mortgage From A 30 Year Term To 15 Year Term

Homeowners who are able to qualify for a 15 year fixed rate mortgage loan term can save tens of thousands of dollars.  15 year fixed rate mortgages have lower mortgage rates than 30 year fixed rate mortgages.  By refinancing their 30 year fixed rate mortgages to 15 year fixed rate mortgages, the homeowner can save almost 70% in mortgage interest over the life of their home loan.

Refinance FHA Loan To Conventional Loan And Eliminate FHA Mortgage Insurance

Homeowners with a FHA loan can eliminate the hefty FHA annual mortgage insurance premium by refinancing their current FHA loan into a Conventional loan.  You still need to pay private mortgage insurance on a conventional loan if you have less than 20% equity in your home but private mortgage insurance is much less than FHA mortgage insurance premium.  Also, most conventional mortgage lender has LENDER PAID MORTGAGE INSURANCE which is also referred to as LPMI where for a slightly higher rate, the borrower does not have to pay mortgage insurance.

Cash-Out Refinance Mortgage

Homeowners who purchased their homes starting in 2010, especially in California, Illinois, Florida, Indiana, Texas, most likely purchased their homes at rock bottom values where the chances are that their properties have appreciated double digits and have equity in their homes.  Some areas in California, Florida, and Illinois have property values that increase over 40%.  Homeowners with equity can do a cash out refinance mortgage.  FHA allows up to 85% loan to value on a cash out refinance mortgage.  Conventional cash out refinance mortgage allows up to 80% loan to value.  VA Loans allow up to 90% loan to value on cash out refinance mortgages.

Streamline Refinance Mortgage

FHA, VA, and USDA permit streamline refinance mortgage where no income verification is required, no credit scores are required, and no appraisal is required.  Streamline Refinance Mortgages are very simple and streamlined where the only documents that are required is the copy of the mortgage note, most recent mortgage statement, copy of the declaration page of the homeowners insurance, and copies of drivers license and social security cards.  Two months bank statements will be required to see if the homeowner has sufficient funds to bring one month mortgage payment to closing.  You get to skip one month of mortgage payment.

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