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  • TIPS & ADVICE / from Zillow Porchlight STORY / BY ON 16 FEB 2016

    From the time the Federal Reserve raised rates in December 2015 to mid-February 2016,mortgage rates dropped to their lowest level in three years. We examined why mortgage rates would drop after a Fed hike, andsince the downward mortgage rate trend is continuing,here is a refinance reference guide.

    2016 rate recap and outlook

    Rates drop when economic uncertainty causes investors to sell riskier stocks and buy safer bonds. When bond prices rise on this buying, bond yields (or rates) drop.

    This is whats been happening in 2016 as non-U.S. economic weakness has caused global investors to buy the safety of U.S. Treasury and mortgage bonds.

    In December 2015, 30-year fixed rates were about 4% on conforming loans, 4.125% on high-balance conforming loans, and 3.875% onjumbo loans. As bonds have rallied since then, rates on all these loan tiers are down as much as 0.5%, which translates into lower monthly payments as follows: $85 lower on a $300,000 mortgage, $170 lower on a $600,000 mortgage, and $253 lower on a $900,000 mortgage.

    This savings alone is strong rationale for a refinance, and rates could drop even further in the next few months if non-U.S. weakness persists. But even in a downward rate trend, rates rise and fall along the way. (See When to lock your rate below for more on how to lock in the lows.)

    Factors driving a 2016 refi boom

    Refinances aren't just about rates. They're also about income, asset, and property eligibility.

    During previous post-crisis rate dips, many refinances were derailed because people owed more than their homes were worth, their income was down or disrupted, and lender guidelines were abnormally tight.

    Now the U.S. economy is more supportive of refinances, with stable or increasing home prices, low unemployment of 4.9 percent, income trending up, low inflation helped by a steep drop in oil prices, and lender guidelines more flexible now than any other post-crisis rate dip.

    Reasons to refinance

    The most obvious reason to refinance is for a lower rate and monthly payment, but there are a few other refinance objectives to consider:

    Shorten your loan payoff period. For example, you could go from a 30-year loan to a 15-year loan, which has lower rates and higher payments because you pay it off in half the time but when rates dip, payments on 15-year loans become more feasible.Access cash. A cash out refinance allows you to access your homes equity for other financial objectives, such as retirement investing or funding home improvements.Consolidate debt. If you qualify, you can roll non-housing debt like student loans, credit cards, and car loans into a home refinance. This helps improve your credit score, and also converts that non-tax-deductible debt into tax-deductible debt.Eliminate mortgage insurance or a second mortgage. If you bought your home with less than 20 percent down using mortgage insurance or a second mortgage, and your homes value has increased to the point that you now have 20 percent equity, a refinance can eliminate mortgage insurance or a second mortgage.Credit score impacts of rate shopping

    Credit scoring models know people shop for mortgages, so more than one mortgage-related credit run wont reduce your score if youfinish shopping within 14 days.

    Choose a lender early

    A rate quote is based on a refinance closing within a certain number of days typically 30-60 days and longer rate locks have higher rates. So choose the lender you want to work with early, and get them all of your required documentation so they can perform on the shortest (and therefore cheapest) possible rate lock timeline.

    Required documentation

    Even if you refinance with a lender you've worked with before, federal laws require them to update your employment, income, asset, and debt documentation for a new loan.

    Your home must qualify

    In addition to you qualifying for the loan, your home must qualify, too. An appraisal report must prove your home is worth enough to make the refinance work, and lenders can require certain repairs prior to loan closing like water-related damage or safety issues such as loose railings.

    If you're a condo owner, the condo building will be subject to a list of requirements. Ask your lender to brief you on condo requirements in advance of locking your refinance.

    Handling your second mortgage

    If you have a second mortgage you intend to leave in place, the second mortgage holder must agree to the terms of the refinance before the refinance closes. This is required even if you have a Home Equity Line of Credit (HELOC) with a zero balance. This can add time to the process, and, again, longer rate locks have higher rates.

    Cost or no-cost refinance?

    Refinance viability is all about how it takes monthly savings from a refinance to repay refinance closing costs ($2,000 to $4,000, depending on your market). But if you paid to refinance, then rates dropped more, you'd risk losing money.

    So when rates are declining, you can choose to do a no-cost refinance. The rate will be slightly higher on a no-cost refinance, but then you're not wasting closing costs if you refinanced again soon after because rates dropped.

    Your lender can help determine the best path based on your profile and rate market expectations.

    When to lock your rate

    Before locking a refinance, find a lender to pre-approve you using your full documentation and home value estimate so you can be sure you're being locked on a program and timeline the lender can perform on. And if your refinance pre-approval is ready to go, its easier to lock rate lows on a moments notice as rates bounce up and down on each trading day.

    What to do if rates drop after you've locked your rate

    Rates change daily, and if rates drop after you commit to your rate lock, lenders have renegotiation policies that enable you to capture part of that drop.

    For example, if rates dropped .25 percent after your rate lock commitment, typical lender renegotiation policies would allow you to drop your locked rate by .125 percent.

  • Americans Think Homeownership is a Sound Investment

    Media Contact: Jane Dollinger / 202-383-1042 / Email

    WASHINGTON (October 14, 2015) A vast majority of Americans believe that buying a home is a solid financial decision, and most believe they could sell their home for at least its initial purchase price, according to a new survey from the National Association of Realtors. The 2015 National Housing Pulse Survey also found that a preponderance of Americans think that now is a good time to buy a home.

    The survey, which measures consumers' attitudes and concerns about housing issues in the nation's 50 largest metropolitan statistical areas, found that more than eight in 10 Americans believe that purchasing a home is a good financial decision, and 68 percent believe that now is a good time to buy a home. Seventy-one percent believe they could sell their house for what they paid for it, a jump of 16 percentage points from 2013.

    When asked for reasons about why homeownership matters to them, respondents answers did not change significantly from past years. Building equity, wanting a stable and safe environment, and having the freedom to choose their neighborhood remain the top three reasons to own a home.

    "Homeownership is part of the American Dream, and this survey proves that dream is alive and thriving in our communities," said NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark. "Realtors believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream in a safe, responsible way, which is why NAR advocates homeownership issues and educating potential buyers about achieving their property investment goals."

    The number of renters who are now thinking about purchasing a home has increased since the last survey in 2013, up from 36 percent to 39 percent. Sixty-one percent of renters stated that owning a home is a priority for their future. According to the survey, 80 percent of respondents believe that pre-purchase counseling programs and classes are very or somewhat important. Forty-five percent of homeowners who said they did not take a counseling program, reported they would have taken part in one had it been easily available to them.

    Attitudes about the housing market have improved in recent years. Forty-nine percent of respondents indicated that they feel activity in the housing market has increased in the past year, compared to 44 percent in 2013 and 12 percent in 2011. Eighty-nine percent expect home sales in their area to either increase or remain the same. Concern about foreclosures has also declined, with only 15 percent of respondents indicating that foreclosure is a major concern.

    In addition to improved attitudes about the housing market, survey participants also showed an improved outlook regarding the economy. Only 36 percent think that job layoffs and unemployment are a big problem, a substantial drop from 45 percent in 2013.

    Perceived obstacles to homeownership have remained mostly unchanged compared to recent years; 78 percent of respondents point to college debt and student loans as the main obstacle to making a home purchase affordable. Seventy-six percent of participants said they have a full-time job but still did not make enough money to purchase a home. Seventy-four percent believe they do not have enough money for a down payment and closing costs.

    As the market has improved, concern about the cost of housing has increased. Two-thirds of survey participants said that home prices are more expensive than they were a year ago. There is additional concern over the lack of available housing; 41 percent said the lack of affordable homes is either a very big or fairly big problem in their area, an increase of 9 percent points from 2013.

    For adult millennials under the age of 35, the burden of student debt is their chief concern, with 86 percent of respondents naming college debt as an obstacle to homeownership. Over half reported that their housing costs are a financial strain on their budget, 65 percent are concerned about high rental prices, and 60 percent are concerned about high home prices. However, millennials tend to have a more upbeat and positive view about the future of the nation than older Americans, with 42 percent of millennials saying that the country is headed in the right direction compared to only 20 percent among those aged 50 and older.

    The 2015 National Housing Pulse Survey is conducted by American Strategies and Myers Research & Strategic Services for NARs Housing Opportunity Program. The telephone survey polled 1,000 adults nationwide in the 50 most populous metropolitan statistical areas. An additional 250 interviews were conducted with millennial adults (born after 1981) from the same geography. The study has a margin of error of plus or minus 3.1 percentage points.

    The National Association of Realtors, "The Voice for Real Estate," is America's largest trade association, representing more than 1.1 million members involved in all aspects of the residential and commercial real estate industries.

    Courtesy National Association of Realtors. Click Here for Original Article.