During these troubled times in the financial community a tremendous amount of confusion has developed. Not only on the national front (it is still confused) but on the personal front. Fear has been injected into the everyday norm. That word has displaced confidence and sound thinking. We obviously can’t do anything about the national situation until election time but, we can on the home front.
The question continues to arise SHOULD I OR SHOULDN’T I REFINACE OR PURCHASE. Frankly this is a no brainer if your current situation allows. There is a formula for ascertaining the savings for refinancing. Typically if you can save 1.25% or greater on your interest rate you should refinance. As of today interest rates are the lowest they have been in over ten years. They are hovering around 5% for a thirty year fixed rate conforming loan and around 4.625 % for a fifteen year conforming loan. They won’t go significantly lower. This being said NOW IS the time to refinance or purchase.
The rules have changed somewhat so beware. Values are diminished in most of the Houston area. This can have a direct impact on your refinance particularly. Your appraisals are being done by a nationally appointed appraisal company. This is the oversight and overcorrection appraisal situation known as HVCC. (acronym for HomeValuation Code of Conduct). This is a nationally accredited appraisal company that is appointed by your lender. Your values may have dropped and consequently your refinance will be at a lower loan to value vs your current mortgage loan. Unfortunately you may find that you owe more than your home is currently worth. This is a shock factor that is all to common these days. This will correct in the future but, not overnight.
As for purchases the news is much better. You are dealing with current values when you purchase your home. The new lending rules that apply however, are a little more cumbersome and consequently the underwriting timeline is lengthened. I may caution you not to put yourself into a corner by contracting for a short term close. Additionally be prepared to put some money down for your new home. The days of “warm body” loans are over. If you have good credit, 95% conforming loans are available. There will be a mortgage insurance requirement for all over the 80% loan to value mark. There is another option of putting a second mortgage on the home in lieu of MI. FHA requirements are a little different and there is no mortgage insurance required.
Be sure to cover all bases with your mortgage professional before entering into a contract for purchase. The process can and should be a pleasant experience. I recommend patience for all parties concerned. The buyer, seller, realtor and the mortgage professional.
If you are entertaining purchasing a home now couldn’t be a better time or place. Real estate is at it’s lowest point in years along with mortgage rates at the lowest level since I have been in the business. Go for it and good luck.