Rates have dropped lower than we’ve seen in the last two years. 30 year fixed rates are back in the 3% which will create a massive refinance boom. We are at the front end of this boom however, sometimes we get dips in rates and they jump back up making right now the perfect time to refinance. One of the first opportunities would be for someone who has purchased a home in the last two years; your interest rate is most likely higher than rates are now. Even if your interest rate is in the low to mid 4% you could still save a lot of money by refinancing.
People who have bought homes in the last few years have Primal Mortgage Insurance or Mortgage Insurance Premium for FHA loans. Your actual interest rate is your interest rate plus the mortgage insurance factor. For instance, if someone bought on an FHA loan at 4.5% and FHA was at 1.35% for their monthly mortgage insurance you can add that on making 5.85% your actual interest rate. You should be looking at the combination of these numbers because that’s what you might save.
For many years we have seen Underwriting guidelines constrict making it tougher for people to qualify and demanding more money down. Now we are seeing this go in the opposite direction with two big changes that have happened.
A few years ago Fannie Mae and Freddie Mac started requiring instead of 3% down it would be 5% down. They have now loosened that up by creating a 3% down program called My Community. This program is mainly for first time home buyers who are below the median income for the year. In St. Louis this would be under $67,100, they also have to take a home buyers education class. By doing this they can get in a Conventional loan for only 3% down.
This week FHA announced that they were finally cutting their mortgage insurance premiums. Because FHA lost so much money over the course of several years they continued to ration up what they would charge on a month basis. There used to be a mortgage insurance factor of .5% extra on your interest rate. The mortgage insurance factor went from .5% to 1.35% within a five year span. The big change that FHA announced this week was that the mortgage insurance factor would be cut from 1.35% to .85% which is half a percent of savings. An example would be, if you have a $150,000 loan your monthly mortgage insurance payment would be about $165, with this new change you would save $60 a month and $720 a year. This would be a 36% decrease on your MIP. Anyone who has bought their home in the last couple years with an FHA loan can now not only refinance and save on the interest rate but you can also save on the mortgage insurance.
If you or anyone you know is in an FHA loan get in touch with Doug right away so that he can review your situation to see if there is an opportunity for you to save. On an FHA loan we can do a streamline refinance where frequently you don’t even need an appraisal. This is one of the only programs available where you can still do it without an appraisal. If you’d like more information you can call or text Doug Haldeman at 314-472-DOUG (3684)