March 25, 2020
At one point during the coronavirus crisis, refinance applications spiked. Some sources report that spike hitting over 100% at the height of the application surge; people rushed to take advantage of sub-three-percent mortgage loan interest rates.
Part of the surge may also have been due (this is speculation) to a misconception that when the Fed performed emergency interest rate cuts, it directly cut mortgage rates.
The Fed doesn’t function that way, but the misunderstanding of how the Fed works may have contributed to the overall impression that refinance loan rates were going still lower.
In the news, talk of an economic recession puts fear in the minds of some homeowners; what can you do to protect your bottom line in a time when many businesses are temporarily closed and paychecks are at a premium?
The first thing to remember is that if you are in danger of falling behind on your mortgage, call your loan officer. Don’t miss even a single payment without having made a plan with your lender.
If you need to refinance your home loan to avoid going into loan default, explain your concerns to the lender and ask what options there are to prevent that.
Do you need an FHA-to-FHA Streamline Refinance? This loan is for borrowers who want a lower payment or a lower interest rate. It is also perfect for those who need to get out of an adjustable rate FHA loan and into a fixed rate.
Some borrowers need to refinance and repair their home. The FHA refinance loan option for these borrowers is the FHA 203(k) Rehabilitation Refinance mortgage.
Some borrowers may not need to refinance but may need loan forbearance or loan modification in order to avoid foreclosure. In these cases, contact your lender as soon as possible as your options are more limited the more payments you miss.
Refinance loans require closing costs to be paid, and at the time of this writing many potential refinancers may be due economic stimulus checks from the government. Hanging on to those stimulus check funds to use toward closing costs on a refinance loan is a very smart idea.
Even without the stimulus, borrowers who refinance into lower payments help their bottom line in a time when every dollar counts. Not all borrowers are ready or right for refinancing. But if you are, now is a good time to explore your options.
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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