Mortgage rates on 30-year, fixed rate loans are hovering near the lowest level on record since 1951. While some home buyers are putting their home purchases on hold hoping rates will go even lower, many industry experts are advising homeowners with rates in the upper 4 percent range to refinance.
MAKING SENSE OF THE STORY FOR CONSUMERS
Homeowners with rates in the upper four percent range are likely to benefit from refinancing, according to Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, Calif. He says refinancing to a lower rate often produces monthly savings, as long as the borrower can qualify under today’s industry credit guidelines and loan-to-value underwriting standards.
Some homeowners also may be good candidates for no-cost refinancing, where the title, escrow, and lender closing charges either are added to the mortgage principal balance or paid for over time with a slightly higher rate. The upsides to this option are reduced monthly payments, improved cash flow, and no outset of dollars at settlement.
Borrowers who want to become debt-free faster and can afford it, ought to consider refinancing out of a 30-year term loan into a 15-year term. Fifteen-year mortgages carry lower rates than 30-year loans, but their faster amortization schedules require higher monthly payments.
When considering whether refinancing is the best option, consumers are advised to take into account all of the fees associated with the refinance and decide if the money saved is worth the cost of the refinance.
You know that when you are seeking a mortgage you should shop around for the best rate. But because interest rates fluctuate, it is a good idea to consider locking your rate. A rate lock, also called a “lock-in”, is a lender’s guarantee that you will get a specific interest rate and number of points if you purchase a home within a certain period of time.
If you do not complete your home purchase or refinancing agreement before the lock expires and interest rates happen to rise, you will pay the higher rate. If interest rates happen to drop during the lock period, however, you cannot take advantage of them unless you rewrite the lock and pay an additional cost.
Before locking in a rate, keep these tips in mind:
- Get your guaranteed rate lock in writing.
- Lock in as many of the costs as you can, including the interest rate and points.
- Shop around. Examine both the terms of the contract and its cost. Some lenders charge an up-front fee, while others offer the service at no cost.
Today’s market holds tremendous opportunities for first-time buyers and the REALTORS® dedicated to assisting them in their first home purchase. Housing affordability is at historic highs in many areas as low mortgage rates, government tax credits, and lower home prices have continued to make the goal of homeownership within reach for every California household−but they can’t do it alone. They need you, the California REALTOR® , with the skills and market knowledge to navigate through this often difficult process of buying a home. While these transactions do take a little more effort and preparation on the part of the REALTOR® and the home buyer, there is no greater reward than getting that family into their first home.
The CALIFORNIA ASSOCIATION OF REALTORS® continues to be a strong advocate for programs that will assist home buyers in these difficult economic times. We have developed this guide as an introduction to the programs currently available to potential California home buyers from federal, state, and local agencies. Because these programs do evolve over time, always contact the relevant agency to verify program availability and eligibility before you begin. If working with first-time home buyers is your calling, you will need to invest in learning about the various programs that are offered in your community.
With this guide, you’ll learn the basics of working with these programs and some practical tips to help you avoid the common pitfalls.
2010 C.A.R. Financing Guide for California Home Buyers
from CAR’s website
