Uncommon Knowledge
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Buying a home in Alaska is increasingly challenging for residents, as home prices are higher than during their 2022 and 2023 peaks and mortgage rates have risen by more than 50 percent in the past six years, according to a new study by the Alaska Housing Finance Corporation (AHFC).
Read more: What Is Mortgage Refinancing? How Does It Work?
Between 2018 and 2024, the average principal and interest payment for homes purchased in Alaska increased by 52 percent, the study released on June 19 found. Newsweek contacted AHFC for comment by phone on Wednesday morning.
Higher mortgage rates are likely to be another factor in making homes unaffordable for many aspiring buyers in the state, on top of relatively high home prices.
According to the latest Redfin data, the median sale price of a home in Alaska was $388,400 in May, up 2.2 percent compared to a year earlier. In May 2022, it was $363,000. Anchorage, the state’s largest city, was the number one metropolitan area in the state with the fastest-growing sale price, up 3.8 percent in May compared to a year earlier.
Read more: How to Calculate How Much House You Can Afford
Prices are still climbing despite inventory growing significantly in the past year, with 2,230 homes for sale in Alaska in May, up 19.8 percent year-over-year. Newly listed homes were up 21.3 percent compared to a year earlier. But the average month of supply is only two months—far from the six months that is considered enough for the market to turn in favor of buyers.
The situation isn’t any easier for people renting in the state. Since 2018, average rents have increased by 24 percent, reaching an average of $1,325 statewide in 2024, up from $1,250 a year earlier.
All seven communities analyzed by the AHFC experts saw rents increases, including the Municipality of Anchorage (+7.84 percent), Fairbanks North Star Borough (+4.17 percent), Juneau (+3.85 percent), Kenai Peninsula Borough (+4.71 percent), Ketchikan Gateway Borough (+8.41 percent), Kodiak (+20.83 percent), and Matanuska Susitna Borough (+6.38 percent).
Daniel Delfino, the director of planning and program development for AHFC, told Alaska News Source that the housing situation in Alaska is complicated, with “a lot of things moving at the same time.”
“We don’t have a ‘it’s this’ or ‘it’s that’ answer anymore to some of the housing challenges that people are facing,” Delfino said. “It’s an expensive place to build, Alaska. Most of our communities are expensive to build, and before the pandemic and the challenges after the pandemic, inflation and interest costs of land made those challenges harder.”
Are you an Alaska resident trying to get a mortgage, or struggling to buy a home? Have you been affected by the recent increases in mortgage rates? Tell us about your experience by contacting [email protected].
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
A ransomware attack on Bay-area Patelco Credit Union caused almost half a million members to lose access to banking services, and the outage could last for weeks.
The company shared news of the attack on June 29 via Twitter. The services knocked off line include online banking, the company’s mobile app, direct deposits, transfers, debit and credit card transactions, Zelle, balance inquiries, online bill payments and monthly statements, among others.
In addition to consumer banking, Patelco Credit Union is a mortgage originator and offers home equity lines of credit and mortgage refinancing. The company is based in Dublin, California but serves the San Francisco Bay Area and Northern California.
Patelco CEO Erin Mendez released a statement on Wednesday saying its cybersecurity specialists have gotten “core systems” validated and that the money of members is “safe and secure.” She added that she doesn’t expect to have the systems up and running this weekend.
“I know this continues to cause our members frustration and many of you have questions,” she said in the statement, adding that any fees incurred as a result of the shutdown will be waived. “We hear your concerns and are working around the clock to address them. Our team is committed to doing everything we can to support our members through this difficult situation.”
The Mercury News reported that the hackers infiltrated the bank’s internal databases via a phishing email and encrypted its contents, which locked the bank out of its systems.
Patelco operates as a nonprofit cooperative and has $9 billion in assets. While the company has provided daily updates since the attack on June 29, there doesn’t appear to be a timeline for when their systems might be back up and it has warned that further outages could come.
Services that remain online include check and cash deposits, ATM withdrawals, ACH transfers, ACH for bill payments, and in-branch loan payments.
Source: housingwire.com
Refinancing a mortgage is a decision that can have a significant impact on your financial journey. It’s a process where you replace your existing mortgage with a new one, often with different terms and interest rates.
This move can potentially save you money, adjust your payment schedule, or allow you to tap into your home’s equity. However, it’s not a decision to be taken lightly. Refinancing comes with its own set of closing costs and considerations that need careful evaluation.
In this article, we’ll dive deep into the world of mortgage refinancing. We’ll explore the reasons why refinancing might be a good idea, the different types of refinancing options available, and, importantly, the closing costs associated with the process.
Whether you’re looking to lower your monthly payment, change your mortgage type, or access some cash, it’s essential to understand the nuts and bolts of refinancing. We aim to provide you with the knowledge and tools needed to make an informed decision about whether refinancing your mortgage aligns with your financial goals.
Homeowners might consider refinancing their mortgage for various compelling reasons. Each situation is unique, but there are a few common motivators that lead many to explore the refinancing path. Understanding these reasons can help you assess whether refinancing aligns with your financial objectives.
Each of these reasons reflects a different financial need or goal. Refinancing a mortgage can be a powerful tool, but it’s essential to weigh the benefits against the costs and long-term implications. The right choice depends on your personal circumstances and financial objectives.
Refinancing your mortgage isn’t a one-size-fits-all solution. There are several types of refinancing options available, each with its own set of features, benefits, and drawbacks. Understanding these can help you determine which option best suits your financial needs and goals.
A cash-out refinance allows you to replace your existing mortgage with a new loan for more than you owe on your home. The difference is paid to you in cash, which can be used for various purposes like home renovations, debt consolidation, or other financial needs.
Pros:
Cons:
A HELOC is a revolving line of credit that lets you borrow against the equity in your home. It works similarly to a credit card, where you can draw funds as needed and pay them back over time.
Pros:
Cons:
This type of refinancing involves switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. It offers a stable interest rate and a predictable monthly mortgage payment for the life of the loan.
Pros:
Cons:
Each refinancing option serves different financial scenarios and objectives. So, analyze your financial situation, consider the long-term implications, and perhaps talk to a financial advisor to choose the most appropriate path for your needs.
When considering refinancing your mortgage, be aware of the various fees and costs involved. Each of these costs plays a role in the overall financial equation of refinancing, and they can vary significantly based on your lender, loan terms, and even geographic location.
As a general rule of thumb, expect to pay around 2% – 6% of your loan balance in closing costs. This percentage can give you a ballpark figure to start with when estimating the expenses involved in your refinancing process.
This is a charge by the lender for processing your new mortgage application. It generally ranges from $75 to $300 and covers the cost of credit checks and administrative expenses.
Often the most significant cost, the origination fee, is charged by the lender for evaluating and preparing your mortgage loan. It’s typically calculated as a percentage of the loan amount (ranging from 0% to 1.5%). This fee can vary greatly among lenders, so it’s wise to compare offers.
Points, also known as discount points, are optional fees paid at closing to reduce your interest rate. Each point is typically equal to 1% of the loan amount. While this can save you money over the life of the loan, it increases your upfront costs.
This fee, ranging from $300 to $700, pays for a professional appraisal of your home to assess its current value. Lenders require this to ensure the loan amount is not more than the home’s worth.
Ranging between $175 to $350, this fee covers the cost of a professional inspection of the property to identify any structural or mechanical issues.
This fee, usually between $500 to $1,000, is for the services of an attorney or a title company during the closing process to ensure all legal documents are correct and in order.
If you’re not already insured, or if additional coverage is needed, this cost can range from $300 to $1,000. It ensures the property is insured before the lender approves the refinancing.
For certain loan types, like FHA or VA loans, there are specific fees or insurance premiums. For example, FHA loans include a 1.5% upfront fee and a yearly premium. VA loans have a funding fee that varies based on the loan type and down payment.
Costing between $700 to $900, this covers the title search and insurance, ensuring there are no liens or problems with the ownership of the property.
If required, this fee ranges from $150 to $400 and pays for a survey to confirm the property’s boundaries and structure.
Not all loans have this, but some might charge a prepayment penalty for paying off your current mortgage early. This could range from one to six months of interest payments.
Each of these fees contributes to the total cost of refinancing your mortgage. To get a clear picture of how much refinancing will cost you, it’s important to obtain detailed estimates from potential lenders and consider how these costs weigh against the potential savings or benefits of refinancing.
The closing costs associated with refinancing a mortgage can vary significantly depending on your location (state) and the lender you choose. This variability is influenced by local regulations, market conditions, and individual lender practices.
To better understand the impact of refinancing, let’s explore a few real-life scenarios. These examples will highlight how different refinancing options can play out financially.
John and Sarah’s Story:
The Smiths’ Experience:
Alex’s Decision:
These examples illustrate how refinancing can serve different needs, from reducing payments to accessing equity. The right choice depends on personal financial situations and long-term goals.
Your credit score plays a major role in refinancing. It affects not only your ability to qualify for refinancing, but also the interest rates you’ll be offered.
By understanding and improving your credit score, you can position yourself for better refinancing options and terms. Remember, refinancing is a tool that, when used wisely, can align with and enhance your financial strategy.
Refinancing a mortgage involves several steps. Here’s a general outline of the process:
Remember, the refinancing process can vary in length and complexity based on individual circumstances and the lender’s requirements. It’s important to ask questions and understand each step to make informed decisions throughout the process.
The decision to refinance your mortgage is significant and multifaceted. It’s essential to weigh the potential benefits, such as lower interest rates or altered loan terms, against the costs and implications that come with refinancing. Each homeowner’s situation is unique, and what may be advantageous for one may not be the best choice for another.
Understanding the impact of your credit score on refinancing options, the variability in closing costs by state and lender, and the specific steps involved in the refinancing process are key to making the right decision. Remember, refinancing is more than just securing a lower interest rate; it’s about aligning the decision with your overall financial goals and long-term plans.
Before taking the leap, consider all these factors carefully. Consulting with financial advisors or mortgage specialists can provide additional clarity and guidance tailored to your personal circumstances. Refinancing can be a powerful financial move when done for the right reasons and under the right conditions, but you must take the time to fully understand and prepare.
Source: crediful.com
An official at the New Mexico Mortgage Finance Authority expects foreclosures to double this year on mortgages it oversees in the state, citing the wind-down of federal pandemic protections, high interest interest rates and other factors.
Theresa Lloyd, the authority’s director of servicing, told the board at a meeting Wednesday that some New Mexicans with subsidized loans are “already at the end of their rope” to avoid foreclosure and face the end of programs that could help them stay housed.
Last year, 36 New Mexico households with home loans overseen by the Mortgage Finance Authority saw their house go into foreclosure and then resold to a new buyer. Lloyd predicts there could be between 60 and 75 such foreclosures this year.
“I hope I’m wrong,” she said in an interview with Source New Mexico.
That number is a tiny subset of more than 13,000 home loans the authority oversees that were issued since June 2016 to low-and middle-income borrowers. The worrying trend, Lloyd said, will prompt the authority to dig deeper to understand the fates of those losing their homes and what could have prevented that from happening.
And even though it’s a small number, people lost their homes, Lloyd told board members. “But where they landed, I don’t know.”
Lloyd could not describe to board members any factors common to the New Mexico households who lost their homes, or say whether private investors bought the newly vacant homes at auction. Following questions from board members, she said her team at the Mortgage Finance Authority will look more closely at the issue going forward.
“It’s not a big number,” board member Rebecca Wurzburger said of the foreclosures. “But it is a big number if you’re the person that loses your home.”
Legislature and governor tout ‘largest one-time investment in housing’ during 2024 session
The prospect of increased foreclosures occurs during a statewide housing affordability crisis and a sharp increase in homelessness statewide.
During the legislative session, lawmakers approved nearly $200 million for housing investments, which they touted as “historic.” The Mortgage Finance Authority received a one-time payment of $50 million for a housing affordability trust fund, and the New Mexico Finance Authority got $125 million for affordable housing infrastructure loans.
Lloyd said lifting pandemic-era laws prohibiting foreclosures on owner-occupied homes is a big reason behind the increase. Many of the households at the cusp of disclosure have exhausted a range of programs the authority offers to help defer payments or create new payment plans, she said.
Also, high interest rates make it harder to take advantage of the MFA’s programs for mortgage refinancing, she said.
Earlier this month, the MFA stopped accepting applications for direct mortgage assistance from the Housing Assistance Fund, which paid households up to $30,000 toward their mortgage if they suffered pandemic-related income losses. Lloyd said the authority ran out of money.
The authority, with money Congress awarded at the beginning of the COVID-19 pandemic, paid more than $45 million to 4,410 applicants, according to the program’s website.
The mortgages in question were provided through federal agencies or enterprises, like Fannie Mae, Freddie Mac or Ginnie Mae, and the state Mortgage Finance Authority services them.
Lloyd said at the meeting that the authority has no wiggle room to prevent foreclosures.
“We have to follow their guidelines,” Lloyd told board members.
Source: sourcenm.com
RIYADH: Citizens will have easier access to home loans as the Saudi Real Estate Refinance Co. extends its refinancing agreement with Arab National Bank (ANB), adding SR500 million ($133 million).
This is the second deal of its kind between the Public Investment Fund-owned SRC and ANB, according to a statement.
This move signifies SRC’s ongoing efforts to support the Kingdom’s home financing market by expanding mortgage refinancing and offering funding solutions to real estate entities to drive growth.
“The purchase agreement for the investment portfolio worth SR500 million came to continue the company’s efforts with its partners to enhance financial sustainability in the real estate financing market in order to achieve the objectives of the Housing Program within Saudi Vision 2030,” Saudi Minister of Municipal and Rural Affairs and Housing Majid Al-Hogail said in a post on X.
He added that the deal aims “to enable financing agencies to provide appropriate solutions to citizens in their homeownership journey.”
The deal also underscores both parties’ commitment to supporting sector development by providing convenient property financing options to Saudi citizens.
Moreover, SRC CEO Majeed Fahad Al-Abduljabbar said: “With our shared vision to support the Kingdom’s housing market and enable accessible home financing solutions for Saudi citizens, we are pleased to extend our partnership with ANB.”
He added: “Through this partnership, we will further increase market liquidity that will enable the origination of new home financing portfolios.”
The CEO highlighted that this extension is not just a continuation of the collaboration between both entities but also a vital step in SRC’s commitment to supporting the strategic objectives of Vision 2030’s Housing Program.
On the other hand, Obaid Al-Rasheed, CEO of ANB, stated, “ANB is honored to continue our strategic partnership with SRC, reinforcing our joint commitment to the Kingdom’s housing sector.”
He added: “This enhanced agreement is a testament to our dedication to supporting the national vision. By increasing the origination of new home financing portfolios, we are not only contributing to strengthening the Kingdom’s financial ecosystem but also the objectives of Vision 2030’s Housing Program.”
In January, SRC and Al-Rajhi Bank entered into an agreement to expand the pool of new housing options for the Kingdom’s residents, involving the purchase of a real estate financing portfolio valued at SR5.8 billion.
Since then, SRC has signed a series of refinancing deals with leading banks and mortgage finance companies in the Kingdom, aiming to broaden Saudi citizens’ access to home financing solutions.
Through these agreements, the company offers liquidity, capital management, and balance sheet de-risking solutions to enhance the financing capacity of home financiers and originators.
Source: arabnews.com
A cup and handle pattern is something identified by stock traders or investors analyzing data related to certain securities. Traders analyzing stock charts can identify a cup and handle pattern, which comprises a period of falling values followed by a “breakout,” and use it to help inform their trading decisions.
The cup and handle pattern is one of many that investors may identify and use to help make investing decisions.
The cup and handle security trading pattern is a bullish continuation pattern used in technical analysis. When the pattern appears on a stock chart, it shows a period of price consolidation followed by a price breakout. The pattern is called cup and handle because it has two distinct parts: the cup and the handle.
The cup pattern forms after an advance and looks like a bowl with a round bottom. It forms after a price advance. After that pattern forms, a “handle” forms to the right of the cup within a trading range. Finally, there is a breakout above the range of the handle, showing a bullish continuation of the prior advance.
Stock broker William O’Neil identified the cup and handle stock pattern and introduced it in his 1988 book, How to Make Money in Stocks.
💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.
The cup-and-handle candlestick pattern starts with the formation of the “cup,” which looks like a bowl. The two sides of the cup are not always the same height but in a perfect scenario they would be. Once the cup forms, the stock price pulls back, forming a “handle” out to the right of the cup. The handle shows price consolidation happening before a price breakout occurs.
The handle is smaller than the cup and generally doesn’t retrace more than ⅓ of the cup’s advance, staying in the upper part of the cup range. It can also form a triangle shape. If the handle forms at the bottom price range of the cup, the pattern may indicate that this is not a good time to trade. It may take six months or longer for the cup pattern to form, but the handle forms much faster, ideally within four weeks.
The entire pattern can also form within minutes or days. Technical analysts watching the cup-and-handle pattern try to buy when the price breaks out from the handle. This is marked by when the price moves above the old resistance level, which is the top of the right side of the cup. The more volume in the breakout the stronger the buy signal.
To estimate the price target the stock might hit after the breakout, a trader would measure the distance from the bottom of the cup to the top of the right side of the cup and then add that number to the buy signal point. If the left and right sides of the cup are different heights, the smaller side would give a more conservative price target, and the taller would be a more aggressive target.
The cup-and-handle is a candlestick pattern that indicates a cup-shaped price consolidation. This involves a downward price movement, a stabilization period, then a price increase of about the same amount as the downward movement.
This is followed by a sideways pullback between the high and low of the cup shape, forming the handle. Then, a price breakout indicates increasing trade volume. However, as with any trading pattern, a cup-and-handle pattern does not guarantee the stock price will continue on a bullish trajectory, it’s just a trading indicator.
The cup and handle is a bullish pattern that can show a continuation or a reversal from a bearish trend into a bullish trend. Either way it indicates that the stock price will likely rise following the pattern.
An example of a cup and handle pattern would be if a cup shape forms between $48 and $50. A handle should then form between $49 and $50, ideally closer to $50. Then the price should break out above the price range of the handle.
💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.
The cup-and-handle pattern is one strategy that traders can use to get a sense of the market and inform their investing decisions. However, it is not a perfect tool.
Like any trading pattern, the cup and handle should be used in conjunction with other trend indicators and signals to make informed trading decisions. Although the cup and handle pattern can be a useful and easy to understand pattern to find entry and exit points, it does have some drawbacks.
The cup-and-handle pattern may form over the course of a day, weeks, months, or even a year. This makes it challenging to figure out exactly when to place a purchase order. Generally it forms over a month to a year, but identifying the exact breakout point is not easy.
Also, the depth of the cup can be a confusing part of the pattern. A shallow or a deep cup might be a false signal. The cup also doesn’t always form a handle at all, and the liquidity of the stock also affects the strength of the trading signal.
Traders wait for the handle pattern to form, which may either be in the shape of a sideways handle or a triangle. When the stock price breaks out above the top of the handle, that indicates completion of the cup-and-handle pattern, and creates a signal that stock price could continue to rise.
Although the cup-and-handle pattern can be a strong buy indicator, it does not guarantee that prices will go up. The stock price may rise, fall again, then continue to rise. Or it might rise and then simply fall.
One way to avoid significant losses when this happens is to set a stop-loss on trades with your broker. Day traders may want to close out the trade before the market closes.
While the cup-and-handle pattern has traditionally been used for stock trading, it can also be used in crypto trading. Cup and handle patterns have formed in Bitcoin and Ethereum charts in recent years. Bitcoin formed a cup and handle pattern in 2019, and Ethereum formed one in 2021. The basic guidelines and indicators are the same for crypto as for stocks.
Recommended: Crypto Technical Analysis: What It Is & How to Do One
Stock patterns are signals that form a certain recognizable shape when charted graphically, making them easy to spot and trade. They can help traders find entry or exit points, estimate price targets and potential risk. The cup-and-handle pattern is a useful and easy to follow trading pattern to help traders spot entry points for bullish trades.
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Yes, the cup and handle pattern is considered a bullish market signal, and investors may take it as a sign that they should go “long” on an investment or specific market position.
The cup and handle pattern is merely an indicator, and not a promise or sure sign that something is going to happen. As such, investors should be careful not to take it as a sure thing. That said, investors may do well to use it in conjunction with other trading strategies and methods, and along with other trend markers.
The cup and handle pattern doesn’t have “rules” per se, but instead, is a pattern that forms on a stock chart. That form shows a stock price decreasing in price over a short period of time, then stabilizing, forming a “cup,” which is then followed by a rise in value, creating the “handle.”
Cup and handle patterns can emerge on a stock chart over several months, but many times, over a handful of weeks.
Photo credit: iStock/jacoblund
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Mortgage loans refinancing declined for the week ending March 22, contributing to a drop in home loans applications even as interest rates decelerated, data from the Mortgage Bankers Association (MBA) showed on Wednesday.
The Refinance Index fell 2 percent from the prior week and was 9 percent lower compared to a year ago. Overall, mortgage applications dropped by 0.7 percent at a time when the 30-year fixed rate mortgage ticked down to 6.93 percent from the prior week’s 6.97 percent.
“Mortgage application activity was muted last week despite slightly lower mortgage rates. The 30-year fixed rate edged lower to 6.93 percent, but that was not enough to stimulate borrower demand,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement shared with Newsweek.
Read more: What is Mortgage Refinancing and How Does It Work?
The drop in refinancing applications comes as the housing market has been in flux nationwide.
Borrowing costs for home loans jumped to their highest since the turn of the century last year, peaking at about 8 percent in the fall. That jump in mortgage rates was sparked by the Federal Reserve hiking rates to their highest in more than two decades as policymakers moved to tighten financial conditions to battle soaring inflation. Expectations that the central bank will start lowering those rates has helped bring mortgage rates down.
Recent data suggests that buyers are still looking for lower borrowing costs. New home sales declined in February, amid high mortgage rates that economists say depressed activity as the housing market enters its busy Spring season.
Kan said on Wednesday that still elevated mortgage rates are still keeping buyers on the sidelines.
“Purchase applications were essentially unchanged, as homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market,” he noted.
Kan suggest limited housing inventory is also proving to be a hindrance to the market.
“Lower rates should help to free up additional inventory as the lock-in effect is reduced, but we expect that will only take place gradually, as we forecast that rates will move toward 6-percent by the end of the year,” he said. “Similarly, with rates remaining elevated, there is very little incentive right now for rate/term refinances.”
Read more: Best Mortgage Lenders
The lock-in effect was particularly acute in the existing homes market. Most homeowners have low mortgage rates which has discouraged them from putting their properties in the market if that means they may have to acquire a new home with borrowing costs closer to 7 percent. About 90 percent of homeowners own mortgages that are under 6 percent, according to real estate platform Redfin.
There have been some signs recently that the existing homes market is recovering after struggling mightily last year.
In February, sales of previously owned homes rose by nearly 10 percent.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Refinancing your mortgage, or replacing your existing home loan with a new one, can lower your interest rate and monthly payments or even get you extra cash from the equity in your home.
Not all homeowners are approved for refinancing, though. With home prices and interest rates still high, lenders are careful about who they approve. The rejection rate on mortgage refinance applications increased to 15.5% in 2023 from 9.9% in 2022, according to the Federal Reserve Bank of New York.
If you’ve been turned down, you still have options for refinancing — and ways to improve your chances next time.
Lenders rely on federal underwriting guidelines from Fannie Mae and Freddie Mac when deciding whether to approve a refinancing application. Some issues are easier for borrowers to address than others.
How much of your money is tied up in paying off debts is a major factor in getting approved for refinancing. Your debt-to-income (DTI) ratio is determined by dividing your total monthly debts (including your current mortgage) by your gross monthly income.
A DTI of 35% or less is ideal, according to Experian, although lenders typically will consider a ratio up to 43% for refinancing a conventional mortgage, depending on how strong the rest of their application is.
A credit score of at least 620 is usually needed to secure refinancing, although you may be able to get FHA cash-out refinancing with a score in the 500s.
An appraisal of your home’s fair market value ensures it hasn’t significantly depreciated, especially to the point that it’s worth less than what you owe (known as an “underwater mortgage”).
If the appraisal indicates your home is in poor condition or has renovations that are not up to code, it could also lead to being turned down.
The amount of your home that you own outright is known as home equity. If you put 5% of the cost of the property as a down payment, you’re starting with 5% home equity. That amount increases as you make mortgage payments and as the home’s value increases. You typically need to own at least 20% of your home outright to refinance your mortgage.
According to Fannie Mae’s underwriting guidelines, lenders look at an applicant’s career history and income over several years. Ideally, they want to see at least two years at your current job, but you probably won’t have to worry about a promotion or a better-paying job in the same industry. A consistent income is the key.
Taking a lesser role or lower-paying job and lengthy gaps in employment are more serious red flags, as is changing jobs in the middle of the application process. However, you can always try to explain your circumstances to your lender.
Lenders are legally required to explain why you’ve been turned down. Find out the reason (or reasons) and if possible, make any necessary changes so you’ll be approved next time.
You may need a lender that is willing to accept a lower credit score. Rocket Mortgage works with applicants with scores as low as 580, rather than the 620 required by most lenders.
Apply online for personalized rates
Conventional loans, FHA loans, VA Interest Rate Reduction Refinance Loan (IRRRL) and jumbo loans
8 – 29 years
Not disclosed
580 if opting for FHA loan refinance or VA IRRRL; 620 for a conventional loan refinance
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Ally Bank offers cash-out refinances for conventional and jumbo loans, allowing homeowners to convert their home equity into cash and take out a loan that’s larger than their current mortgage. Ally doesn’t charge application, origination or processing fees and its website has a refinance calculator that provides customized rates without affecting your credit score.
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Fixed-rate, adjustable-rate and jumbo loans available
15 – 30 years
5/6 ARM, 7/6 ARM, 10/6 ARM
Not disclosed
Terms apply.
If you didn’t put 20% down when you bought your home, you may need to pay off another chunk of your mortgage before you’re able to secure refinancing.
If your credit is the problem, take some time off to raise your score. Focus on making on-time bill payments and lowering your credit utilization ratio, or the amount of available credit you’re using. Avoid opening or closing any lines of credit and check your credit reports for any errors.
Experian Boost™ is a free way to improve your credit score. It links utility, phone and streaming service payments to your Experian credit report and uses the You’ll get an updated FICO® score delivered to you in real-time.
On Experian’s secure site
13 points, though results vary
Experian®
FICO® Score
Results will vary. See website for details.
Technically, you can reapply right away, but each application requires a hard credit check, which temporarily lowers your FICO score. So, consider why you were rejected first — if your credit score was too low or you don’t have enough home equity, address the issue before applying again.
If you were turned down because of a recent job change, you may have to wait up to two years to reapply.
Whether it’s because you’ve been denied or the rates are still too high, refinancing might not be an option. Fortunately, there are ways you can lower your mortgage payment without refinancing.
If you have a conventional mortgage, your lender will automatically cancel PMI when you reach 22% equity. You might be able to request cancelation once your equity reaches 20%.
Some lenders will allow you to make a large lump-sum payment toward your principal balance and then re-amortize your loan. The terms remain the same when you recast your mortgage, but the lower balance means smaller monthly payments and an overall decrease in the amount you’ll pay in interest.
If you’re facing financial hardship, you can ask to change the terms of your mortgage permanently to help you avoid foreclosure. You can also request a forbearance to temporarily reduce or pause your mortgage, but you’ll eventually have to repay the late or suspended payments.
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Refinancing your mortgage is when you replace your existing home loan with a new one, typically to get a lower interest rate.
Depending on the lender, there are several fees associated with refinancing, usually 3% to 6% of the loan. Freddie Mac suggests putting aside $5,000 for refinancing closing costs
An applicant can be denied refinancing for various reasons, from a low credit score to a new job. If you know why you were turned down, you can work on the problem and reapply.
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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Source: cnbc.com
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The US economy is in a tricky spot. To close out 2023, fourth quarter GDP measured at a robust 3.3% annual growth rate, but inflation remains above the Fed’s desired 2% target, so the central bank has yet to cut interest rates. Still, many expect that rate cuts will come this year as the economy and inflation cool down more. For the mortgage market, that could also mean that rates come down.
Already, 30-year mortgage rates have fallen from recent highs. While they reached approximately 8% in October 2023, they now average 6.63% as of the beginning of February 2024, according to Freddie Mac.
But what will happen the rest of the year? Below, we’ll look at three possible mortgage rate scenarios.
If you’re in the market to buy a home then start by exploring your mortgage rate options here now.
Here are three possible scenarios for mortgage rates this year, according to the experts we spoke to.
Mortgage rates could continue to trend downward this year, especially once the Fed starts cutting the federal funds rate.
“Mortgage rates will go down in 2024. How much and when depends on the economy and inflation. I believe that we will see rates trending to 6% in the summer, perhaps not until late summer,” says Melissa Cohn, regional VP at William Raveis Mortgage. After that, “I believe that rates will drop below 6% and stay below 6% for the year.”
Some experts predict an even larger drop, though still not at pandemic-era levels.
“I believe they will fall to 4.25%,” says Dan Green, CEO at Homebuyer.com. “Inflation is solved, lenders are competitive, and the bond market is finding its health.”
See how low of a mortgage rate you could get now.
While some people think that mortgage rates will fall further, not everyone is convinced that they’ll drop significantly from their current levels. As mentioned, GDP remains strong, and lower rates tend to coincide with a weakening economy, which might not occur.
Shannon Feick, co-owner and co-founder at ASAP Properties, LLC, says he’s “confident that the relatively strong economy will likely prevent rates from falling below 6% in 2024, but with inflation cooling, mortgage rates will fall slightly from their current levels.”
Still, it’s possible that the economy’s health and inflation rate get thrown off by unexpected events, like how geopolitical conflicts have caused oil price swings, which can ultimately influence interest rate decisions.
“I do believe that curveballs like geopolitical events or significant shifts in the job market could alter this forecast, but only by a small amount,” says Feick.
Another scenario could be that rates end up staying essentially the same, with mid-6% interest rates persisting.
“I think rates will stay flat on average this year, meaning that they will stay in the mid-6s, which is where we dropped to at the end of the year, going into 2024,” says Sam Sharp, executive VP of mortgage lending at Guaranteed Rate.
It’s also possible that rates go higher, but Sharp thinks that the current levels seem to be working.
“I believe that the markets have tested their threshold. When rates capped over 8% the housing market saw a steep decline. As soon as rates dropped into the mid-6s we saw a quick change, and this looks to be a sweet spot in the current environment,” he says.
“Not only is this a level that buyers seem more comfortable with, but I feel this is a good baseline for some sellers, and their motivation is what we need to create a balanced housing market,” explains Sharp.
Learn more about today’s mortgage rates online here.
It’s hard to predict exactly where mortgage interest rates will go in 2024, as much depends on factors like the state of the economy and how the Fed responds to inflation. But if you can afford to buy a home now at current levels, you might be better off doing so for two main reasons.
One, it’s hard to say how long you’ll have to wait for rates to drop — if they do at all — and you might not want to put your home search on hold indefinitely. Two, a decrease in mortgage rates could increase competition among homebuyers, as those who have been waiting for rates to drop might jump in, thus complicating the process.
However, one advantage of waiting to buy a home could be that more sellers jump in, too. Some sellers have been reluctant to give up their homes and then buy a new one at high mortgage rates. But if rates do drop, or if sellers simply get more accustomed to current rates as the new normal, then that could increase inventory.
So, you’ll have to weigh these factors, along with looking at your finances and the local conditions in your desired area to see what makes the most sense for you. And while you probably don’t want to bank on it, mortgage refinancing could be an option down the road if rates drop further.
Start exploring your current mortgage rate options here.
Source: cbsnews.com
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Today’s mortgage rates are quite a bit higher than the rates that hovered near 3% in late 2020 and early 2021. But they’re also quite a bit lower than the 8% (or higher) interest rates from October 2023. So, depending on when you purchased your home, you may be wondering if now is a good time to refinance.
After all, if you purchased your home when mortgage rates were at their peak last year, refinancing now could lead to meaningful savings. On the other hand, there are costs involved with a mortgage refinance related to the appraisal, application, loan origination and more. Considering these costs, how much do mortgage rates need to drop to make refinancing worth it?
Compare your mortgage refinancing options now.
“This is the million dollar question, and it’s not the same for everyone,” says Earl Dell, SVP of national retail sales and acquisitions at Mutual of Omaha Mortgage. “A lot of this goes into what your current mortgage balance is at this time, and how long you plan to stay in your home.”
For example, let’s say you owe $250,000 on your home with a 30-year mortgage at 8.35%. You could refinance your home with a new 30-year mortgage with a lower interest rate of 7.25%, but doing so comes with fees that range, on average, from 3% to 5%. If we’re assuming 3%, that would equal about $7,500 in fees.
At the current rate of 8.35%, you would pay $433,433 in interest in total over the life of your mortgage loan. However, if you refinance your home with a 30-year loan at a 7.25% interest, you would pay a total of $364,365 in interest over the life of the loan. And, after accounting for the $7,500 in fees, refinancing would result in a total savings of $61,568 in interest over the life of your mortgage.
If you have a mortgage with a higher balance and rate, a drop of 0.5% interest could be worth refinancing, according to Dell. “For a lower balance, rate and term refinance, it may be at least 1% or more to be worth your time and money,” Dell says.
It’s also important to consider how long you plan on living in the home, according to Dell.
“If you plan on moving in the next two years, I would hold off from refinancing,” he says.
Find out how much you could save by refinancing your mortgage today.
If your current mortgage rate is lower than today’s rates, there may be no long-term interest savings when you refinance. However, mortgage refinancing may still be worth considering in certain cases. For example, you could refinance from a 30-year loan term to a 15-year loan term at a slightly higher rate to pay off your mortgage loan quickly. Or, you could use cash-out refinance at a slightly higher rate to pay off high-interest debt if a home equity loan isn’t an option.
Tap into your home equity with a cash-out refinance now.
There are numerous factors to consider before refinancing your loan — but your new mortgage rate plays a large part in whether or not it makes sense to do so. And, while a 1% drop in mortgage rates nearly always makes sense to consider, in certain cases, even a slight drop in mortgage rates could make refinancing worth it — especially if you plan to stay in your home for the long term. Before you make any decisions, though, just make sure to understand the short- and long-term implications of refinancing your mortgage loan to ensure that it’s the right move for you.
Source: cbsnews.com