Refinancing Mortgage: The Secret To Saving Thousands On Your Mortgage |



Have you conducted a home loan health check lately? You might be surprised if you find out that despite getting a pretty good loan back then, there is still some room for you to save. The solution does not lie on your current home loan. What you might want to do is try to look at what’s out there for you if you wish to find ways to reduce your monthly mortgage costs.




A lot of people today are actually dealing with higher interest rates, which mean they have to pay bigger interest payments. The situation is the perfect time to find a better deal in the market. And once the opportunity to refinance to a better mortgage product reveals itself, you don’t let it pass. However, you do need to consult with your lender or a separate mortgage expert regarding your situation. Refinancing mortgage, just like other home loan solutions, has advantages and disadvantages. Before you can refinance, you will have to deal with the refinancing costs which will be comprised most likely of exit fees and several other charges your lender might impose.


Benefits of Refinancing to a New Loan


Refinancing to a new loan has other advantages aside from the obvious fact that of allowing people to lower their mortgage costs. Refinancing loans allows you to use the equity stored in your home as guarantee for a new loan. You can use the loan to fund the renovation and of your property. You can also purchase an investment property if you want using the funds you get from the refinancing home loan. Last but not the least, refinancing allows you to easily consolidate your loans as well as unsecured debts (e.g. credit card and personal loan) into one so you won’t have to pay high interest rates. The best thing about debt consolidation is that it makes debt management easy because you only have to manage a single account.


You can take advantage of refinancing when the interest rates are down. Once you have secured a loan, you can lock it in fixed rate for 15 to 30 years in order to preserve the low interest rate. When the rates go up, you’ll be saving a lot compared to those with variable rate loans. However, refinancing to a variable rate loan is the better option if you are not permanently settling in your home.


Refinancing mortgage takes you back to step one when you first applied for a mortgage. And if you remember, you need to have a cautious approach because you do not want to defeat the purpose of your refinancing. Simply put it, it’s buying your first all over again, which means you might encounter the same obstacles and procedures.

By  Robert  Charlson

A Closer Look at Qualified Mortgages – Starting 1/10/2014

By Jeff Bounds  |  December 10, 2013

Big changes are coming for residential mortgage lenders starting next year.  That’s when new rules from the federal Consumer Financial Protection Bureau (CFPB) go into effect concerning the origination of home mortgages.

Fannie Mae has made some changes to its eligibility standards as a result, but before looking at those, it’s helpful to understand the new Ability-to-Repay and qualified mortgage (QM) rules.

Underlying the QM concept is the Ability-to-Repay rule that the CFPB issued on January 10, 2013. This rule, which takes effect on January 10, 2014, requires mortgage lenders to consider consumers’ ability to repay their home loans before extending credit to them.

Ability-to-Repay Rule

Broadly speaking, the Ability-to-Repay rule requires a lender to only make a loan that the lender reasonably believes the borrower has the ability to repay at the time the loan is made. Borrowers must provide financial documentation to support this, and lenders must verify all the documents that the borrower provides.

Under the Ability-to-Repay rule, lenders have to consider and document at least eight underwriting criteria in deciding whether to lend money for a home purchase or refinance, said John Burley, associate general counsel for Fannie Mae. The criteria are:

  1. The borrower’s current or expected income or assets.
  2. The borrower’s income and employment status if the borrower is claiming to have employment income.
  3. Monthly payments on the loan, including any possible changes if the interest rate is adjustable.
  4. Monthly payments on other loans being made at the same time secured by the property that the lender is aware of.
  5. Monthly costs of other mortgage-related obligations the borrower has, such as homeowners’ association dues or property taxes.
  6. Other loans and debts the consumer has, such as alimony, child support, or credit card debt.
  7. The borrower’s debt-to-income ratio.
  8. Credit history.

What Makes a Mortgage Qualified?

Think of a QM in three ways. At one level, it’s a loan that meets various standards that the CFPB has established. In a more simple sense, it’s a loan for which the lender presumes the borrower has the ability to repay. And for the lawyers in the crowd, the granting of QM status provides a defense for lenders against legal actions that borrowers can now bring over loans they’ve taken out and later claim they can’t afford under the ability to repay standards.

Under CFPB rules, a QM must have the following characteristics:

  • Loans may not have terms that extend beyond 30 years, and all principal must be paid in substantially equal installments over the life of the loan.
  • Points and fees, which are costs that the lender charges to the borrower during the process of applying for the loan, are capped at 3 percent of the total amount the borrower takes out for loans of $100,000 or more.

A Degree of Legal Protection

A major reason why lenders are interested in QM is that they can receive a degree of legal protection from borrower lawsuits if the borrower claims the lender failed to consider the borrower’s ability to repay the loan. Broadly speaking, there are two classes of QMs. The amount and type of legal protection the lender gets will depend on criteria of the QM loan they’ve made:

  • Safe harbor loans have annual percentage rates (APR) that are not more than 1.5 percentage points (or 150 basis points) of the “average prime offer rate” (APOR). (The APOR is determined weekly and relates to Freddie Mac’s survey.) A safe harbor loan is harder for the borrower to challenge in court because the lender is conclusively considered as having fulfilled the Ability-to-Repay rule.
  • Rebuttable presumption loans have APRs more than 1.5 percent above the APOR. The lender in this case gets less legal protection than with safe harbor loans. Borrowers with such loans can potentially win a lawsuit based on the Ability-to-Repay rule if they can prove that the lender didn’t give adequate consideration to living expenses after the mortgage and other debts they were aware of.

Fannie Mae’s New Eligibility Rules

Starting next year, Fannie Mae will impose new limits on the types of loans it can buy from lenders. This is because of instructions that it received on May 2, 2013, from the Federal Housing Finance Agency, which serves as its regulator and conservator.

For loans with applications on and after January 10, 2014, if a loan is subject to the CFPB’s Ability-to-Repay  rule, then Fannie Mae can buy it only if:

  • It is “fully amortizing,” meaning that the borrower can pay the entire principal by making all monthly payments on time. This means Fannie Mae cannot accept negative amortization, balloon or interest only loans for purchase.
  • The term of the loan is a maximum of 30 years.
  • Points and fees are less than 3 percent of the total amount of the loan (higher limits apply to loans under $100,000).

The first two items are relatively straightforward. The third is not. Burley notes that a plethora of rules govern what lenders must include, or may exclude, in points and fees.

“It’s very technical,” he said. “That’s where most of the concerns will be.”

If a loan is exempt from the Ability-to-Repay rule, points and fees must be less than 5 percent of the total loan amount for Fannie Mae to buy the loan.

It’s not Fannie Mae’s role to establish whether a given loan is a QM, nor whether it is of the safe harbor or rebuttable presumption variety. The burden for complying with those regulations rests with the lender.

Nevertheless, Fannie Mae recognizes that lenders face challenges in complying with all of the new regulations. Therefore, during a transitional period of as-yet undetermined length after January 10, 2014, Fannie Mae will not require a lender to buy back a loan on the basis of a Fannie Mae determination that the loan doesn’t comply with the QM points-and-fees requirement, as long as the loan in question is otherwise eligible for Fannie Mae to purchase.

However, lenders will be required to buy back those loans from Fannie Mae if a court, regulator, or other authoritative body determines that points and fees violated CFPB standards.

For More Information

Since the CFPB made the rules governing matters such as QM, Ability-to-Repay, safe harbor, and rebuttable presumption, that agency is the first place lenders should go to get questions answered.

Lenders may want to start with the CFPB’s website, which has a lot of resources to help lenders comply with the new rules. MBAA is also another good source of guidance.

In addition to going to the CFPB, lenders may also consult with the various law firms and advisory shops that are offering advice on complying with CFPB regulations. Fannie Mae can’t endorse any outside firm’s advice for legal compliance.

Fannie Mae has also published guidance around the eligibility requirements, including SEL 2013-06, LL 2013-05, LL 2013-06, and LL 2013-07.

Gift-funded Down Payments for Mortgage

by Ted Rood

New FHA Alternative Boosts Low Down-Payment Options

Jan 3 2014, 3:54PM

As Fannie Mae and Freddie Mac eliminated their 100% and 97% purchase loans following the housing meltdown, FHA financing once again became a preferred low down payment option. FHA loans offer a minimum 3.5% down payment, which can be gifted from a close family member. Thus, buyers whose sales contracts specify seller paid closing costs and who use the gift down payment, can often purchase a home with minimal out of pocket expenses.

FHA allows borrowers with credit scores as low as 580 to put just 3.5% down (those with lower scores face increased down payment requirements), and routinely approves higher debt loads than Fannie Mae or Freddie Mac. The combination of marginal credit scores and low (or no) buyer financial investment contributed to FHA’s default rates as the housing market crashed. As a result, FHA has raised MI significantly and has long since eliminated seller-paid down payment assistance programs.

Fannie Mae also allows down payment funds to be gifts from close family members for single family principal residences, with down payments as low as 5% for qualified borrowers. Until recently, however, private mortgage insurance (required for loans exceeding 80% of sales price) vendors required buyers to contribute at least 2% of their own funds in a transaction in addition to any gift funds. PMI provider United Guaranty recently altered their guidelines and now allow down payments to be exclusively gifts, a move likely soon adopted by competitors. The announcement gives eligible buyers a distinct advantage over FHA’s considerable MIP costs.

FHA’s upfront MIP fees are now 1.75% of the loan size added to the loan balance ($1750 on a $100,000 loan, 3.5% down), with an additional monthly charge of $108.33, which applies for the life of the loan. Conventional PMI costs vary slightly, but have NO upfront fee. United Guaranty’s pricing engine returned a price quote of $64.17/mn for a 720 score, 5% down borrower, a substantial savings of $4,399 over just the loan’s first 5 years compared with FHA’s fees.

The more conservative underwriting guidelines for Fannie Mae gift-funded down payments aim to ensure only qualified applicants receive these loans. Credit scores of 720 or higher (versus minimum scores of 620 for loans without gifts) are required. Debt ratios are limited to a 41% of applicants’ gross income, an even stricter restriction than non-gifted loans. The home must be a primary residence for all those on the loan, and no second mortgages, balloon notes, or temporary interest rate buy downs are allowed. The credit score, debt ratio, and other limitations set Fannie’s 5% down program apart from FHA’s less stringent standards and should result in far fewer defaults.

It is important to note, however, that many lenders have restrictions on gift funds, despite Fannie Mae’s acceptance. Shopping for this program may be challenging. Here’s a few steps to start the process: if you have a preferred lender, call and ask whether they offer this program; if you need a lender, contact a loan officer in your area. You might have to shop around to find a lender offering the program with no overlays.

About the Author

Ted Rood

Senior Mortgage Planner NMLS 543290, Wintrust Mortgage


Fannie Mae: Technology has Role to Fill in Mortgage Shopping Experience

Fannie Mae: Technology has Role to Fill in Mortgage Shopping Experience

Jan 2 2014, 12:20PM

A recent study by Fannie Mae found some distinct differences in the ways higher income earners look for a mortgage compared to lower income earners.  Steve Deggendorf, Fannie Mae’s Director of Business Strategy looked at the shopping behaviors of the two groups through the company’s regular National Housing Survey during the second quarter of 2013.

Deggendorf not only found distinct differences in the shopping behaviors of higher and lower income mortgage borrowers but also found opportunities for online tools that could improve the ability of all borrowers to shop for a mortgage.  Careful shopping, he says, “could help mortgage borrowers obtain better outcomes, including lower costs, fewer surprises at the loan closing table, and higher long-term satisfaction with their choices.”

The study defined the two income groups as those with family incomes below $50,000 and those above $100,000 and found that in general the higher income borrowers were more likely to rely on their own mortgage calculations and use of tools to assess how and how much to borrow.  They were also more likely to pick a lender based on its competitiveness.  The lower income group was more likely to rely on real estate agents, mortgage lenders, family, and friends for advice and recommendations.  In addition the higher income group more often said that a better ability to compare multiple loan offers would make shopping easier while the lower income respondents wanted earlier to understand loan terms and costs.

The higher income group tended to use online shopping about twice as much as the lower income group however all groups would like to increase their usage indicating that the Internet will likely play a growing role for all borrowers and that there is a need for shopping enhancements.



The study found that those who have obtained a mortgage in the last three years were more likely to have used technology in their mortgage shopping than borrowers from an earlier period.  Deggendorf said this could be partially explained by the growing use of on-line tools in general but also by recent borrowers having higher income and education levels than earlier ones.



Despite a general increase in the use of mobile technology (tablets and smart phones) respondents said they tended to rely on their personal computers when shopping for financial products and were also likely to continue to do so.   Respondents also indicated that social media would probably continue to play a small role in mortgage shopping as is currently the case.

Deggendorf says many researchers have observed that the use of online research and mobile tools enable consumers to obtain product reviews and compare prices both at home in in stores.  He says that only time will tell what inroads enhanced technology tools allow us to make in improving outcomes for more complex activities such as mortgage shopping.  They could, for example, offer real-time information and education where and when needed such as when house-hunting or sitting face-to-face with a lender.  “Enhanced online tools, especially given the aspiration to use them much more often in the future, could help consumers of all incomes to become better mortgage shoppers and achieve better outcomes by addressing the issues they think will make the process easier, such as enhancing their understanding of mortgage terms and costs and their ability to make simultaneous comparisons of loan terms from multiple lenders.”


WASHINGTON – Today the Department of Housing and Urban Development (HUD) announced that it will implement new FHA single-family loan limits on January 1, 2014, as specified by the Housing and Economic Recovery Act of 2008 (HERA). Read FHA’s mortgagee letter detailing the agency’s new loan limits.“As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play,” said FHA Commissioner Carol Galante. “Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still under-served.”

The current standard loan limit for areas where housing costs are relatively low will remain unchanged at $271,050. The new national-ceiling loan limit for the very highest cost areas will be reduced from $729,750 to $625,500. Areas are eligible for FHA loan limits above the national standard limit, and up to the national ceiling level, based on median area home prices. Additional information and loan limit adjustments for two-, three-, and four-unit properties, and in Special Exception Areas, are noted in FHA’s mortgagee letter. An attachment to the Mortgagee Letter provides information on which counties are eligible for loan limits above the national standard. Borrowers with existing FHA insured mortgages may continue to utilize FHA’s Streamline refinance program regardless of their loan balance. The changes announced today are effective for case number assignments between January 1, 2014, and December 31, 2014.

Full mortgagee letter HERE.

HARP Loans

Act Now to Refinance Your Home Before It’s Too Late

There has never been a better time to refinance your home. That’s because of a little known government program called the Home Affordable Refinance Plan (HARP), you may have heard it called an “Obama Loan”. This allows Americans to refinance their homes at shockingly low rates, and reduce their payments by as much as $12,000 a year.

But here’s the catch – like most government programs, this is likely temporary. But the good news is, once you’re in, you’re in. If the thought of a lower payment, fewer years on your mortgage, and even taking some cash equity out of the deal is appealing, the time to act is right now.

A true middle-class stimulus package

This is unknown to many, but the Home Affordable Program is for the middle class. If your mortgage is $729,000 or less and have had your loan since 2009, you most likely qualify. Basically, the Government wants banks to cut your rates, which puts more money in your pocket (which is good for the economy). However, the banks aren’t too happy about this – here’s why:

* You can shop several lenders, not just your current mortgage holder
* Your home’s Loan-to-value (LTV) can be 80% to 225%

Do you think banks like that? No, they do not. They’d rather keep you at the higher rate you financed at years ago. That’s why the pressure is on. The Middle Class seems to miss out on everything (did you ride the last stock bubble? Probably not). Thus, it’s silly not to jump on this now. You need to act fast in order to refinance your house at these very low refinance rates. If your mortgage rate is currently higher than 3.11%, you can greatly benefit:
The average monthly savings is $275. Can you use an extra $275 a month?

Many homeowners not only save every month, but depending on their current rates, they can also shorten their term.
Get cash now – because the rates are so low, besides the benefits above, many homeowners also opt to take a little cash equity for home improvements, a vacation, or a nice boost to the savings account.
Deferred payments – typically, one or two payments are skipped / deferred as well.

Here is an example of how much can be saved:

Here’s an example of what can be saved by a rate of 3.25% and 6.75% (which is around what most homeowners currently have because they got loans years ago):

Term: 30 Years
Loan Amount $225,000
Payment at 6.75% $1,459.35/month
Payment at 3.25% $979.21/month
Saves you $480.14/month or $5,761.68 per year!

So this means over the life of your mortgage, you can save more than $172850. That’s just by lowering your “already good” rate of 6.75% to an even lower 3.25%.

This is why you have to act – you will likely lower your payment, possibly shorten your term, AND also get cash. Plus, skip a payment or two. There’s zero downside. This is how powerful that little word called “interest” is. The middle class never sees “breaks” like this. So this is your chance to get “in”.

Here’s the trick – Call me or send me an email and I can tell you if you qualify!

There’s no obligation and the process is fast & easy. It takes about five minutes, and is 100% free to see if I can help you. You have nothing to lose except money stress.

But you do have to act now.

Leo Hefner
Courtesy Mortgage Company
CABRE# 01910923
NMLS# 995044