How To Refinance When Your Home Is Underwater

The Federal Housing Finance Agency has extended the government's Home Affordable Refinance Program by 12 months.

HARP's new end date is June 30, 2011.

Originally known as Making Home Affordable, HARP aims to help Wisconsin homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
2. Your home must be a 1- to 4-unit property
3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
4. Your first mortgage balance must be 125% or less of your home's market value

If you're not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie's website is http://www.fanniemae.com/loanlookup; Freddie's is http://freddiemac.com/mymortgage.  If you don't locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP's criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either -- regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn't matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be "rolled in" to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government's website, but it's for general questions only. For specific Home Affordable Refinance Program information, first make sure you're program-eligible, then pick up the phone to call your loan officer. 

HARP is complex enough that you'll want to talk with a human before taking a proper next step.

How To Refinance When Your Home Is Underwater

The Federal Housing Finance Agency has extended the government's Home Affordable Refinance Program by 12 months.

HARP's new end date is June 30, 2011.

Originally known as Making Home Affordable, HARP aims to help Minnesota homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.

There are 4 basic HARP criteria every borrower must meet:

1. The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
2. Your home must be a 1- to 4-unit property
3. You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
4. Your first mortgage balance must be 125% or less of your home's market value

If you're not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie's website is http://www.fanniemae.com/loanlookup; Freddie's is http://freddiemac.com/mymortgage.  If you don't locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.

For homeowners that meet HARP's criteria, there are some underwriting details of which to be aware.

First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either -- regardless of your new loan-to-value.

Second, all HARP refinances require income verification. It doesn't matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.

And, lastly, second (and third) mortgages may not be "rolled in" to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.

There is a thorough HARP FAQ section on the government's website, but it's for general questions only. For specific Home Affordable Refinance Program information, first make sure you're program-eligible, then pick up the phone to call your loan officer. 

HARP is complex enough that you'll want to talk with a human before taking a proper next step.

Foreclosures Per Capita | February 2010

According to foreclosure-tracking firm RealtyTrac, foreclosure filings topped 300,000 for the 12th straight month last month as 1 in every 418 U.S. homes received a foreclosure filing.

It's a small improvement from January and a just 6 percent increase over February 2009.

On a per-capita basis, foreclosure density varied by state:

• Nevada : 1 foreclosure filing per 102 homes
• Florida : 1 foreclosure filing per 163 homes
• Arizona : 1 foreclosure filing per 163 homes
• California : 1 foreclosure filing per 195 homes

Also, as in January 2010, foreclosures across the country were concentrated. 10 states beat the national Foreclosure Per Capita average; 40 states fell below. Like everything else is real estate, it seems, foreclosures are local.

For today's Maple Grove home buyers, foreclosures represent an interesting opportunity. 

Homes bought in various stages of foreclosure are often less expensive than other, non-foreclosure homes. It's one reason why distressed home sales account for 38 percent of all resales. However, less expensive doesn't always mean less costly.  A foreclosed home may be in various stages of disrepair and they're often sold as-is, as policy.

Buying new or used can be cheaper than buying broken-down.

Therefore, if you're in the market for a bank-owned home, make sure you know what you're buying before you sign a contract. Have qualified professionals review and inspect the property, as needed. Damage to pipes or the property's structure, for example, may not be so obvious on a walk-though and you'll want to know about it before you buy.

Also, foreclosed homes are federal tax credit-eligible. Buyers must be under contract by April 30, 2010 and closed by June 30, 2010.

Don't Rush To Refinance That ARM -- It May Be Adjusting To 3 Percent Or Lower

If your mortgage is set to adjust this year, the smart move may be to let it. Today's conforming mortgages are adjusting lower than ever before -- as low as 3 percent.  It may not be what you expected when you signed for your ARM several years ago.

The reason why ARMs are adjusting lower is because of how they're made.

When conforming adjustable-rate mortgages adjust, they adjust according to a pre-determined formula. The formula is the sum of a constant and a variable.  The constant is usually 2.25 percent and the variable is a daily-changing interest rate called LIBOR.

The formula looks like this:

New Mortgage Rate = LIBOR + 2.250 percent

LIBOR is an acronym for London Interbank Offered Rate.  It's an interest rate at which banks borrow money from each other. In Fall 2008, when Lehman Brothers fell and sparked a global banking fear, LIBOR spiked as the risk of inter-bank borrowing jumped. 

Since then, however, LIBOR is down.

Normalcy is returning to banking and the timing couldn't be better for Maple Grove homeowners with ARMs. 15 months ago, a homeowner's ARM may have adjusted to 6 1/2 percent.  Today, that same ARM falls to just above 3.

As a strategy play, it might make sense to let your ARM adjust. Or, because fixed rates are still near 5 percent, converting that ARM to a long-term fixed-rate product might make sense, too.  The decision is a balance between how low do you want your payment, and how long might you live in your home.  

The longer you stay, the more it might make sense to switch to fixed-rate, even though ARM rates are so low.

If you've got an adjusting ARM, talk to your loan officer about your choices. Once March ends and the Fed withdraws its mortgage market support, mortgage rates may rise and the fixed-rate option may be gone.

7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits

In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of "move-up" buyers -- homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There's now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there's a basic set of requirements to be tax credit-eligible:

• You can't purchase the home from a parent, spouse, or child
• You can't purchase the home from an entity in which the seller is a majority owner
• You can't acquire the home by gift or inheritance
• Each buyer in the purchase must meet eligibility requirements

There's other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional's opinion is always wise.

And lastly, don't forget that government's tax credit program is a true tax credit. It's not a tax deduction.  This means that a tax filer whose "normal" tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you're currently in the House Hunt, mark your calendar for April 30, 2010. It's 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase.  You may find sellers more willing to negotiate today than several weeks from now.

What's Ahead For Mortgage Rates This Week : March 8, 2010

Mortgage markets improved last week in low-volume trading.

Between Monday to Thursday, Wall Street focused on the upcoming jobs reports and mortgage markets gained while traders jockeyed for position. Mortgage rates drifted lower through Thursday afternoon. But, then, after a better-than-expected Non-Farm Payrolls report Friday morning, mortgage markets -- and mortgage rates -- reversed.

Overall, mortgage rates dropped last week, but only by a small margin. Rates were best Thursday afternoon.

It was the second consecutive week in which mortgage rates fell.

Last week was also interesting in that both stock markets and bond markets improved, proving that rates don't always rise when stock prices do. 455 of the S&P 500 companies posted gains last week.

If you're shopping for a home or a refinance, though, don't rest on your laurels. After Friday's big sell-off, this week opens into a major headwind and, plus, the Federal Reserve's support for mortgage markets ends in just 3 weeks.

This week, without much data to influence traders, the upward momentum in rates may have little cause to temper. We'll see the Consumer Confidence numbers on Tuesday and Retail Sales on Friday.  Beyond that, there's not much else.

After last week’s performance, conforming mortgage rates in Wisconsin may be poised to rise rather sharply. If you're waiting for the right time to lock your rate, it may have been this past Thursday. Consider locking your rate early this week to protect against further rate hikes.