Mortgage Rate Forecast: December 2008

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Lock if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

There are indications that Treasury Dept is considering a plan that, if true, would use Freddie Mac and Fannie Mae to "force banks" to make mortgages available at 4.5% for home buyers. The low interest rate would be available only to those who are purchasing a home, and not for refinancing.

To encourage banks to issue new mortgage loans at lower rates, the Feds are offering to Mortgage Backed Securities (MBSs) at a price equivalent to the 4.5% rate. The details of the Fed's MBS purchase plan are not known at this time. However, one possibility is for the Treasury to raise money by issuing bonds at 3% interest. This would allow the government to turn a profit because it would be buying MBSs that pay 4.5%.

Senior Treasury officials said they were optimistic that subsidizing lower mortgage rates with taxpayer dollars would help revive the housing market. In a meeting with the National Association of Realtors last month, Treasury officials said that the plan will be a more effective way to help homeowners than focusing efforts solely on borrowers who are struggling to meet their monthly payments.

If you have a VA mortgage, now would be a great time to refinance your loan.

The VA has a streamlined refinance program also known as the Interest Rate Reduction Refinancing Loan (VA IRRRL). It's considered a ‘paperless' mortgage product, and it can benefit a VA borrower by lowering their VA mortgage rate interest or shortening the term of their VA home loan - or both!

An IRRRL can be done only if you have already used your eligibility for a VA loan on the property you intend to refinance. It must be a VA to VA refinance, and it will reuse the entitlement you originally used. Additionally, the interest rate on the new VA loan must be lower than the old loan - unless you're refinancing a VA ARM to a VA fixed rate mortgage. The VA Certificate of Eligibility is not required for this loan. Although no credit score, appraisal, and/or income verifications are required by the VA, the lender doing the IRRRL may still request them.

A VA streamline mortgage loan may be accomplished with "no money out of pocket" by including all closing costs in the new VA loan. Or, the new VA loan will be at a higher interest rate so the VA lender can pay the closing costs for you.

The occupancy requirement for an IRRRL is different from other VA loans.  When you originally got your VA loan, you certified that you occupied or intended to occupy the home.  For an IRRRL you need only certify that you previously occupied it.

The new VA mortgage loan may not exceed the sum of the outstanding principal balance on the existing VA home loan, plus fees and closing costs, including the VA funding fee and up to 2 discount points. You can add up to $6,000 of energy efficiency improvements into the new VA loan.

You can not take cash out to pay other bills or to pay other loans. Only the current VA loan may be paid from the proceeds of the new VA loan. If you have a 2nd mortgage, the mortgage note holder must agree to subordinate that mortgage lien so that your new VA mortgage loan will be the first lien holder.

Under the VA Interest Rate Reduction Loan program, you can either lower your payments or shorten the term of the mortgage - or both! Call your lender to take advantage of this opportunity today!

No lender is required to make you an IRRRL. However, any lender of your choice may process your application for an IRRRL. While it might be the best place to start shopping for an IRRRL, you do not have to go to the lender you make your payments to now or to the lender from whom you originally obtained your VA Loan.

FHA has a program where existing FHA mortgage holders can refinance their loan with minimum documentation and underwriting requirements.

The basic requirements of a streamline refinance are:

• The mortgage to be refinanced must already be FHA insured;
• The mortgage to be refinanced should be current (not delinquent);
• The refinance is to result in a lowering of the borrower's monthly principal and interest payments; and
• No cash may be taken out on mortgages refinanced using the streamline refinance process.

Lenders may offer FHA streamline refinances in several ways.

Some lenders offer a "no cost" refinance. This means that there are no out-of-pocket expenses to the borrower, and nothing is added to the existing mortgage balance. Instead, the lender will charge a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the lender pays any closing costs that are incurred on the transaction.

Lenders may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, so an appraisal will be required. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed the original loan amount.

If you have an existing F no HA loan and if you have made your last 12 mortgage payments on time, then you are already approved. There's no employment, income or asset verification, and if you opt for the no cost streamline refinance program, there's no appraisal, either. So you really can easily refinance your FHA mortgage with minimal hassles.

Under the FHA Streamline Refinance Program, you can either lower your payments or shorten the term of the mortgage - or both!

You can do a streamline refinance with an FHA lender of your choice. While it might be the best place to start shopping for a streamline refinance mortgage, you do not have to go to the lender you make your payments to now or to the lender from whom you originally obtained your FHA mortgage.

Since yesterday afternoon's and this morning's losses, Mortgage Backed Securities (MBSs) have reversed course and are now improving. MBSs were down as much as 17/32 this morning from yesterday's close, and is now UP 4/32 - an improvement of 21/32 from today's low.

Remember, on MBS, as the price goes up, the yield goes down - and so do mortgage interest rates. Conversely, as the price goes down, the yield goes up - and so do mortgage interest rates.

If you haven't locked yet, then congratulate yourself for waiting and continue floating. If the trend continues, and if the lenders are in a giving mood, then we may see an improvement in mortgage rates this afternoon.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.

My Lock Advice for Today:

If I were considering financing/refinancing a home, I would...

• Lock if my closing was taking place within 7 days
• Float if my closing was taking place within 8 and 20 days
• Float if my closing was taking place between 21 and 60 days
• Float if my closing was taking place over 60 days from now

This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any or all other borrowers.

Interest rates are based on numerous economic, financial and credit based factors that adjust daily. In addition, lenders can vary on qualification criteria from program to program. If you like the rate today, the safe bet is to lock. Even if rates improve, they wouldn't improve enough in the short term to make you cry about it. But if you are an ardent market bear, and accept the risk of negative mortgage headlines, and believe the economy will just get more bad news next week, and you have the money to risk, you may benefit from floating. Just remember, it always seems more painful to have not locked when you should have as opposed to locking and then watching rates get a little better.