Who Should be Refinancing a Mortgage Now?

There was a time, not very long ago, when everyone should have been refinancing existing mortgages that had higher interest rates than what was being offered. Mortgage rates, which dropped to unprecedented levels, remained historically low for about a year. With talk of the Fed's tapering their QE3 program during the last quarter of this year, who should be refinancing a mortgage now?

Homeowners who have conventional loans and have not already refinanced may consider inquiring about refinancing at this time because application volume is down considerably since earlier this summer. Home prices increased 12.4% in July from a year ago and 1.8% from June, according to CoreLogic. With more equity in existing homes, loan to value is lower which presents a lower risk to lenders who may have previously turned them away.

Since there are still homeowners who remain underwater in certain areas of the country, HARP loans will remain available until the end of 2015. Those who are eligible for HARP refinancing should consider doing so while they are still underwater because a HARP loan is easier to obtain than a traditional refinance. Loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009 are eligible as long as the LTV is above 80% (not necessarily underwater) and other guidelines are met. These refinances do not require an appraisal in most cases. The Mortgage Bankers Association's Weekly Applications Survey for the week ending August 30th reported that the HARP share of mortgage applications rose to 38% from 35% the previous week, evidence that this program is still being used by many borrowers.

Homeowners who currently have FHA loans that were endorsed prior to June 1, 2009 and have not yet refinanced should do so now. These mortgages are entitled to drastically lower upfront and annual mortgage insurance premiums as long as it is a no cash out refinance. FHA's offer of lower MIP is currently set to expire December 31, 2013. While there are guidelines for this program, the FHA streamline program does not require employment verification, credit history or an appraisal. When FHA first offered this program, lenders were flooded with applications. However, this is not the case at this time which presents the perfect opportunity for these homeowners to get in before the end of the year.

High end property homeowners are not left out and are still looking at extremely low jumbo mortgage rates. While these loans may have stricter guidelines, it is still worth the time and effort for any eligible homeowner to refinance before rates go up. Most lenders have returned back to offering jumbo loans, even fixed terms, with very competitive rates and guidelines. This gives jumbo loan borrowers a chance to choose from a pool of lenders when shopping for a deal.

For the most part, there continues to be a great opportunity to refinance even though rates have increased slightly from record lows. Mortgage credit availability has increased, according to the Mortgage Bankers Association, which means that those who were denied may have another chance now. It is inevitable that, at some point, rates will return to an average of what they were prior to the housing crisis. If housing continues to improve, that time may be sooner than later, although no one can predict what will happen.

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