Subordinate financing usually means there is a second mortgage or home equity line of credit recorded behind the first mortgage. If you want to refinance, you may be able to combine both loans into a new first mortgage. If there is not enough equity to combine the 2 loans you can ask the second lien holder to subordinate their loan which simply means satisfy it temporarily until you can refinance the first mortgage and improve the terms, and then re-record the second lien. Ask your mortgage representative for the positives and negatives of all options before making your decision.
If you have a credit score over 600, you may be able to qualify now for an FHA insured mortgage. The down payment is still 3.5% but all or part of it can be a gift if you have not been able to save enough on your own. Debt ratio’s will still be a factor to be sure the payments are comfortably within your budget.
Interest rates vary according to credit score, term of the mortgage (15, 20 or 30 years), loan-to-value (loan amount compared to property value) and property type (primary residences have lower rates than investment property). This means if you call a company and ask what their rates are today, unless they ask you for some information the rate quoted may be incorrect. HARP loans usually have higher rates than conventional loans. Ask questions so there are no surprises when the paperwork arrives!
To qualify for a HARP 2 refinance that may not require an appraisal (appraisal could be required in some cases), your mortgage must be owned by Fannie Mae or Freddie Mac. To find out go to www.freddiemac.com/mymortgage or www.fanniemae.com/loanlookup. It will ask for permission to release the information and your address.
In many cases (but NOT all) an appraisal may not be required which means even if you owe more on the house than the value, you still may qualify for a refinance to lower the interest rate. The HARP 2 program is available for primary residences, second homes and investment property.
Interest rates vary depending on credit scores and other factors so call for a quote.
We are pleased to announce that Proficio Mortgage Ventures/The Grandmark Group is passionate about giving back to our community Heroes also. They have agreed to offer discounted closing costs for refinances and purchases in all 50 States effective March 26th, 2012. Visit them at www.stateheroes.com.
Interest Rates
It is almost impossible to quote rates today because there are so many variables that play a role in the interest rate offered to each person.
· Credit score is critical to the interest rate that will be offered. Credit scores are tiered so the higher the score, the better the rate.
· Loan-to-value ratios are also important. The greater the equity, the lower the risk and therefore a reduced rate or closing costs may apply.
· Interest rates also vary with loan term. For example, the rate on a 30 year mortgage is usually higher than a 20 year rate which is usually higher than a 15 year rate.
· FHA loans often have better rates than conventional loans. USDA loans typically have higher rates than other loans.
· HARP refinances also have higher rates than conventional mortgages.
· If you are quoted an interest rate without being asked some or all of the above questions there is a risk the rate could be incorrect so ask about “add-ons”.
Interest rates can be quoted at par, with closing costs or with reduced closing costs. With a slightly higher rate there can be a premium on the rate which means the borrower could receive a credit towards closing costs. For example, if the premium is 1.0% on a mortgage of $250,000.00 than a closing cost credit of $2,500.00 or a portion of it may be applied toward closing costs. If costs were estimated at $7,500.00 than they would be reduced to $5,000.00 after the credit was applied. This could make quite a difference in interest paid if the costs were being financed in the loan because interest is paid on the gross principal amount financed.
Be sure to ask questions. The numbers are critical to your decision making and all options should be considered.
The revised program known as HARP 2 is still expected to be introduced in March. With this program an appraisal may not be required so many homeowners who owe more on the house than the appraised value may still be able to refinance and lower their rates. Other variables such as credit score, debt ratios and mortgage payment history will apply. More details will be released when available.
We are excited about the revised refinance program effective March 1st, 2012. Once again, as long as no revisions are made between now and then, no appraisal will be required to refinance and lower your rate. There is no cash out allowed but you can include the closing costs and new escrow account. I am pleased to tell you that the reduced fees for our state heroes will apply to this new program.
The new HARP program is on its way. It will open the door for many homeowners who owe much more on their mortgage than the value of their home. The common term is “upside down” when you compare the debt to the value. This is not a program to cure past due accounts. It is to allow refinances to lower rates and consequently lower payments. No cash out is allowed. You can include principal balance on the loan and closing costs with an extra $250.00. Take advantage of this opportunity. It is scheduled to end in December 2013.