Homeowners are eligible to refinance thanks to low rates and programs like FMERR
Refinance shoppers warmed the bench in 2018.
Rates were too high for most homeowners to benefit. Unless they needed a huge amount of cash via a cash-out refinance, they didn’t touch their 4% mortgage.
But a window of opportunity is opening again.
As of the time of this writing, mortgage rates were as low as they were in January 2018 according to housing agency Freddie Mac. Thirty-year mortgage rates averaged just 4.06 percent for the week of May 23, 2019.
Mortgage rates are down 90 basis points (0.90%) since their November highs.
That’s a savings of more than $150 per month on a $300,000 loan.
If rates keep dropping, refinance shoppers may be enticed to pull the trigger. That’s especially true for those getting into a 15-year loan or turning their home equity into cash via a cash-out refinance. Still others may refinance to cancel their PMI or because their credit has improved.
Another option has surfaced: the Freddie Mac Enhanced Relief Refinance, or FMERR. This loan allows homeowners to refinance into today’s lower rates even if they are underwater on their mortgage.
A similar program, the HARP Replacement High LTV Refinance Option permits refinances for underwater homeowners whose current loans are owned by Fannie Mae.
How low do rates have to go before you consider a refinance? It depends on your current rate, of course. But, if you can save $100 per month or more, it’s worth looking into.
Show Me Today’s Rates (Jun 19th, 2019)
Mortgage lenders are more likely to approve your loan
Because rates rose in 2018, lenders are desperate.
Mortgage refinance applications are still down big compared to a few years ago, according to the Mortgage Bankers Association.
For this reason, home purchase and refinance applicants should try and try again if they get denied. Remember: shopping for a mortgage is like shopping for anything else. There are hundreds of sources from which you can buy. If you are denied, try again.
Mortgage companies are likely to stir up business by loosening guidelines in 2019. Higher debt-to-income ratios and lower credit scores may be allowed.
Frustrated mortgage applicants could finally get a “yes.”
Loan product rate updates
Many mortgage shoppers don’t realize there are many different types of mortgage rates. But this knowledge can help home buyers and refinancing households find the best value for their situation.
Following are updates for specific loan types and their corresponding rates.
Conventional loan rates
Conventional refinance rates and those for home purchases are still low despite recent increases.
According to loan software company Ellie Mae, the 30-year mortgage rate averaged 4.62% in April.
This is higher than Freddie Mac’s 4.06% average because it factors in low credit and low-down-payment conventional loan closings, which tend to come with higher rates. Additionally, the most recent Ellie Mae report shows rate levels before they started dropping.
Lower credit score borrowers can use conventional loans, but these loans are more suited for those with decent credit and at least 3% down. Five percent down is preferable due to higher rates that come with lower down payments.
Twenty percent of equity is preferred when refinancing.
With adequate equity in the home, a conventional refinance can pay off any loan type. Got an Alt-A, subprime, or high-PMI loan? A conventional refi can take care of it.
For instance, say you purchased a home three years ago with an FHA loan at 3.5% down. Since then, home values have skyrocketed.
You refinance into a conventional loan (because you now have 20% equity) and eliminate FHA mortgage insurance.
This could be a savings of hundreds of dollars per month, even if your interest rate goes up.
Getting rid of mortgage insurance is a big deal. This mortgage calculator with PMI estimates your current mortgage insurance cost. Enter 20% down to see your new payment without PMI.
Compare Rates From Top Rated National Lenders and Save (Jun 19th, 2019)
FHA mortgage rates
FHA is currently the go-to program for home buyers who may not qualify for conventional loans.
The good news is that you will get a similar rate — or even lower one — with an FHA loan than you will with conventional.
Related: Read more about FHA costs and requirements on our FHA loan calculator page.
According to loan software company Ellie Mae, which processes more than 3 million loans per year, FHA loan rates averaged 4.70% in April, while conventional loans averaged 4.62%.
Another interesting stat from Ellie Mae: About 30% of all FHA loans are issued to applicants with scores below 650.
FHA loans come with mortgage insurance. But the overall cost is not much more than for conventional loans.
A little-known program, called the FHA streamline refinance, lets you convert your current FHA loan into a new one at a lower rate if rates are now lower.
An FHA streamline requires no W2s, pay stubs, or tax returns. And you don’t need an appraisal, so home value doesn’t matter.
Learn more about the FHA streamline refinance here.
Shop and Compare Today’s Rates and Save (Jun 19th, 2019)
VA mortgage rates
Homeowners with a VA loan currently are eligible for the ever-popular VA streamline refinance.
No income, asset, or appraisal documentation is required.
If you’ve experienced a loss of income or diminished savings, a VA streamline can get you into a lower rate and better financial situation. This is true even when you wouldn’t qualify for a standard refinance.
But don’t overlook the VA loan for home buying. It requires zero down payment. That means if you have the cash for closing costs, or can get them paid for by the seller, you can buy a home without raising any additional funds.
Don’t overlook the VA loan for home buying. It requires zero down payment.
VA mortgages are offered by local and national lenders, not by the government directly.
This public-private partnership offers consumers the best of both worlds: strong government backing and the convenience and speed of a private company.
Most lenders will accept scores down to 620, or even lower. Plus, you don’t pay high interest rates for low scores.
Quite the contrary, VA loans come with the lowest rates of all loan types according to Ellie Mae. In April, 30-year VA mortgage rates averaged just 4.41% while conventional loans averaged 4.62%
Check your monthly payment with this VA loan calculator.
There’s incredible value in VA loans.
Shop and Compare Today’s Rates and Save (Jun 19th, 2019)
USDA mortgage rates
Like FHA and VA, current USDA loan holders can refinance via a “streamlined” process.
With the USDA streamline refinance, you don’t need a new appraisal. You don’t even have to qualify using your current income. The lender will only make sure that you are still within USDA income limits.
More about the USDA streamline refinance.
Home buyers are also learning the benefits of the USDA loan program for home buying.
No down payment is required, and rates are ultra-low.
Home payments can be even lower than rent payments, as this USDA loan calculator shows.
Qualification is easier because the government wants to spur homeownership in rural areas. Home buyers might qualify even if they’ve been turned down for another loan type in the past.
Compare Rates From Top Rated National Lenders and Save (Jun 19th, 2019)
Mortgage rates today
While a monthly mortgage rate forecast is helpful, it’s important to know that rates change daily.
You might get 4.3% today, and 4.4% tomorrow. Many factors alter the direction of current mortgage rates.
To get a synopsis of what’s happening today, visit our daily rate update. You will find live rates and lock recommendations.
This month’s economic calendar
The next thirty days hold no shortage of market-moving news. In general, news that points to a strengthening economy could mean higher rates, while bad news can make rates drop.
Friday, June 7: Nonfarm Payrolls, wages, unemployment rate
Wednesday, June 12: Consumer Price Index
Friday, June 14: Retail Sales
Wednesday, June 19: FOMC (Fed) Announcement, Projection Materials released
Friday, June 21: Existing Home Sales
Thursday, June 27: GDP
Friday, June 28: Core PCE
Now could be the time to lock in a rate in case these events push up rates this month.
What are today’s mortgage rates?
Low mortgage rates are still available. You can get a rate quote within minutes with just a few simple steps to start.
Show Me Today’s Rates (Jun 19th, 2019)
Selected sources:
http://www.freddiemac.com/research/forecast/20190515_steady_growth.page?
https://www.elliemae.com/mortgage-data/origination-insight-reports
https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm