March 4, 2020
On Tuesday, March 3, the Fed announced an emergency rate cut, and the reaction to that included mortgage loan interest rates hitting new and historic lows.
The Fed does not set mortgage loan interest rates, but investor reaction to the announcement of the rate cut did affect mortgage rates, and the net effect was that FHA home loan interest rates remain (at the time of this writing) below the three percent range.
And conventional mortgages are holding at the bottom of the three percent zone. These rates, plastered all over the internet, are provided assuming ideal scenarios, but even the average borrower will find the current lower mortgage rate trend to be to their advantage.
New Purchase Loans And Refinance Loans Are Affected
For those who are interested in refinancing? There is plenty of potential to save money on a home loan if you get into a refinance loan while rates are still at rock bottom. The key is to be ready to apply, knowing your FICO scores and other financial information, and also to be ready to commit to closing costs and other expenses.
But when considering your refi options, there are some questions to ask yourself to help get the right kind of loan you need. Not all refinance loan options are alike and some could benefit you more depending on what you need from the loan.
The Purpose Of Your Loan
If you are refinancing to get a lower interest rate and save money over the lifetime of the refinance loan, you’ll want to consider a fixed-rate refinance and not an adjustable-rate loan.
If you are planning on selling the home in a few years, an adjustable-rate mortgage could make more sense, but you will want to discuss the option with your lender.
In the current marketplaces, with its’ lower interest rates, an adjustable rate mortgage may or may not make sense depending on how much the increases will be over time.
Your financial needs and goals are an important part of this equation. Some math is required to see which type of loan (fixed rate or adjustable) works with your needs and why.
Not all refinance loan transactions are meant to help you answer this question, but some are.
Does your home needs remodeling? Does it require energy-saving improvements or other work, your loan choices could address those needs at the same time as getting into a loan with a better rate or terms.
An FHA refinance can include the add-on known as the FHA Energy Efficient Mortgage (FHA EEM).
This add-on to your refinance loan (also available for new purchase loans) which includes extra loan funds earmarked for approved upgrades to the home that will save on utility costs.
Another option? The reliable FHA Rehabilitation refinance loan, helping borrowers get money for approved home improvement projects.
There are two kinds of rehab loans, an FHA standard rehab loan that allows structural work including load-bearing walls and other areas, and a limited version for smaller projects that does not include work on structural issues (load-bearing walls, for example), etc.
The smaller loan is good for those who need to do work on the property but not as ambitiously as rehab work that may require a larger investment.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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