I have written before for Huliq.com that there is a very simple rule of thumb that consumers can use to calculate if mortgage rates will go up or come down. As a rule of thumb, a good day on the stock market is bad for mortgage interest rates and a bad day on the stock market is good for interest rates. The concept behind this is in general that lack of demand will cause an improvement in prices. It is like any other commodity; the lower the price the more people will be interested.
This is what is going on right now with regards to mortgage rates. Not so much that we have had bad days on the stock market but in general there is overall lack of demand for mortgage applications.
Part of the reason for this is that potential mortgage customers have the perception that it is impossible to get a mortgage these days. That is not so. Where the typical loan application for FHA requires a 660 middle score and 3.5% down, we still have alternative mortgage programs that can accommodate a borrower with a middle credit score of 600 with three trade lines paid on time for one year.
Current FHA customers should be looking at the FHA Streamline Refinance without appraisal right now. It doesn’t matter how under water you are on your home, if you choose to lower your loan amount one dollar you can refinance your mortgage without an appraisal and lower your monthly payment. In some cases we can even pay closing costs for you. Since there is no appraisal required your closing costs are lower right from the start.
FHA will continue to be the bread and butter mortgage program as we plod forward in the years ahead. Fannie Mae and Freddie Mac are slowly becoming more expensive and will eventually close up shop. Some believe in as little as 5-6 years. Local banks will fill the gap and provide local financing which used to be a premise for establishing a bank in the first place.
The down side of FHA is the monthly mortgage insurance which nobody likes but the upside is very limited risk. I always tell my customers, keep your money in your pocket for a rainy day. FHA does that with the 3.5% down payment or the streamline refinance.
If your home is worth $150,000 and you owe $180,000 you can still lower that monthly payment and wait out this housing situation with an FHA Streamline Refinance without appraisal. In time the housing crunch will slowly working itself out in places like Florida where I am a banker.
Main Street Financial