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Mortgage Q&A: Refinance now to save cash
Mortgage rates continue to surprise analysts by remaining at unprecedented low levels. It appears the economic woes in the U.S. pale in comparison to what’s happening in some European countries.
Mortgage rates have dropped due to their pattern of following United States Treasury bonds, which are being purchased by worldwide investors as a “flight to safety.” Despite the incredible debt racked up by the U.S. Treasury, the dollar is still perceived as the safest investment in the world.
While underwriting standards have become unreasonably stringent, the availability of different mortgage products is widespread. While so-called “no doc” and “stated income” products are a thing of the past, qualified borrowers can choose from a variety of adjustable- and fixed-rate products. Opportunities for homeowners to save money through a refinance abound. Here’s a sampling:
- Refinancers seeking a 30-year fixed-rate loan carry an interest rate of about 5 percent with no points or closing costs. The so-called “zero cost” refinance rate has only hit 5 percent once or twice in the last 50 years.
- A 15-year fixed rate is nearing 4.50 percent - again with no points or closing costs.
- A 10/1 ARM, which carries a fixed rate for the first 10 years and adjusts annually thereafter, is hovering around 4.75 percent with no closing costs. The much-maligned interest-only payment feature also is available.
- For a 5/1 ARM, expect a rate of only about 4 percent with no closing costs.
Folks, these rates are unbelievable. Many of you might be thinking that the mortgage business has not learned from the past and is back to offering dangerous products to irresponsible borrowers. I don’t think this is the case.
ARMs and interest-only products are indeed available, but only to well-qualified borrowers. Sufficient income must be documented, good credit scores are a must and an ability to save must be demonstrated. A few years ago, these products were available to almost anyone.
It’s been interesting to keep a daily eye on the ever-changing mortgage market over the last three years. At the peak of the credit crunch, lenders simply were not lending money because the products offered were not practical in most cases. Today, a variety of products is available, but only to well-qualified borrowers. Lenders are still skittish.
Homeowners can save a lot of money by refinancing, but they should understand the underwriter will cross every “t” and dot every “i” in the loan package. With these low rates, it’s worth the trouble of dealing with the paperwork.
Henry Savage is president of PMC Mortgage in Alexandria, Va. Send e-mail to Henry Savage” href=”mailto:firstname.lastname@example.org” target=”_blank”>henrysavageHenry Savage” href=”mailto:email@example.com” target=”_blank”>@Henry Savage” href=”mailto:firstname.lastname@example.org” target=”_blank”>pmcmortgage.com.
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By Donald Lambro
Growth spikes are little more than trend-free anomalies
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