Refinancing applications stable
While the Federal Reserve says that the economic slowdown is likely to continue into 2012 and beyond, homeowners who want to refinance are also in an economic slump.
According to the Mortgage Bankers Association’s (MBA) Refinance Index for the week ending October 28, 2011, applications for a home refinance declined by 0.2 percent over the previous week. The refinance share of all mortgage applications also dipped slightly from 77.3 percent of all applications to 77.1 percent. While refinancing applications for conventional loans declined, the refinance share of FHA loan applications rose to 49.4 percent from 48.6 percent.
Refinancing with FHA loans
According to HSH.com, the average mortgage rates on conventional 30-year fixed-rate home loans and 15-year fixed-rate home loans rose slightly last week to 4.45 percent and 3.74 percent, respectively. The average rates on FHA loans stayed the same at 4.00 percent.
If you are a homeowner with an existing FHA loan, you can refinance into another. If you currently have conventional financing, you can also apply for a home refinance into an FHA loan.
Before choosing an FHA loan, you should consider your goals for your mortgage refinance. If you are looking for a reduced interest rate to lower your monthly payments, you need to make sure you consider the FHA requirement of upfront and monthly mortgage insurance payments. While all FHA loans require mortgage insurance, you will also need to pay mortgage insurance on a conventional loan if your home equity is less than 20 percent. Be sure to compare your monthly payments with each potential loan to see which fits your needs best.
If you have less-than-perfect credit, an FHA loan may be your only option, since lenders generally will accept borrowers with a credit score of 620 or 640 for an FHA loan. On a conventional loan, your credit score and debt-to-income ratios need to meet higher credit standards.
The Federal Reserve Board’s pessimistic outlook on the economy means that mortgage rates are likely to stay relatively low for the near future, but mortgage rates are not expected to dip significantly lower than they are now.
