\It’s a great time to refinance, and I’m not just saying that. The proof is in the pudding. Refinances rose 7% in January according to the Mortgage Bankers Association. Mortgage applications increased by 29% the first couple of weeks in January. This is primarily due to the FHA’s newest rules to cut mortgage insurance premiums. They recently cut their insurance premiums for the first time in two years. FHA insurance premiums went down from .85% to .60%.
Why does this matter?
Because those that could previously not afford an FHA mortgage can now afford that. Mortgage insurance has been a added deficit for many first-time buyers to take on but unless a homebuyer has anywhere from 10% to 20% to put down on a conventional loan, the alternative is an FHA mortgage. FHA requires a 3.5% down payment, but they also require mortgage insurance.
Mortgage insurance is the additional fee placed on the homebuyer and added to the mortgage payment each month to cover insurance costs because the purchase of the property was higher than 80% of the loan. Typically, once the property reaches equity of at least 20%, mortgage insurance can be eliminated although it is not automatic. Many FHA loans have a life of the loan requirement, and only refinancing can remove this mortgage insurance. But, now that more buyers can meet the debt to income ratio required to purchase the property and the mortgage insurance premiums are less, this opens an entirely new world for potential homebuyers.
Also, it also opens the door to refinancing.
If you’ve been curious about refinancing your mortgage, it makes sense to take a look at the numbers. If your home has at least 20% or more in equity, you may be eligible for refinancing, to either lower your payment, change your terms or pull out cash equity for home improvement projects or debt consolidation.
If we can reduce your interest rate by a full point, it may significantly change your monthly mortgage payments or your terms. That’s what I do! I’d love to talk to you or your clients today about refinancing options for the Lake Forest, L.A. or Mission Viejo area.
