Loan-to-Value and Locking Mortgage Rates While the Getting is Good
Home loan shoppers ask me all the time … “Should I wait to lock my rate? Aren’t mortgage rates supposed to drop again?” My pat response is to ask my client whether they are willing to risk the benefits available to them now in the event that rates do not drop, and possibly go up, possibly causing them to lose future benefits and maybe scratch the refinance plans altogether.
If the history of financial reporting relating to mortgage rates is any indication, you actually might want to wait to lock your rate if the pundits exclaim that interest rates are going up…(laughter fills the room). All bad jokes aside, there is no way to predict with any degree of accuracy, where mortgage rates will go. In fact, at the present, we are near all-time lows for mortgage rates. If you already have a significant benefit available at the current low rates, how much do you think rates will fall, if they do drop again? Most likely, rates will not drop much further from the lows of this year.
It’s boils down to risk and reward when it comes to locking your rate. Depending upon the current benefit available and the current state of mortgage rates, the borrower stands to risk a large benefit by delaying a rate lock for a relative small reward if rates drop further.
Declining home values across the US are create another valid reason to lock your rate while the getting is good, and the timeframe for you new home loan is long-term.
The continued decline in home sales, makes each current home sale (sale of a comparable home to yours) in your area, that much more critical in how it affects the appraisal value of your home. For instance, if home sales in your area have been low for the previous 12 months and a couple foreclosure sales come through at rock bottom prices, your home stands to lose appraisal value for refinance Loan-to-Value (LTV) qualification purposes.
It is not uncommon that people wait to lock and their home value declines in the interim, raises their LTV, and makes the current refinance program a worse scenario than if they had locked when market mortgage rates were higher.
The LTV grading tiers for qualified interest rates are tightening, which makes home value a crucial decision point for rate lock decisions. Not to mention the huge impact of a declining home value for the homeowner that is currently at or near an 80 percent LTV.
The recent lender reductions in refinance cash-out caps, also makes home value king for qualifying LTV’s near 85 percent.
The moral of the refinancing story in today’s market is that if you have a pre-qualified loan program that gives you the benefit that you want or need, it would be wise to think twice about risking your “Bird-in-the-Hand”, for visions of a future drop in mortgage rates.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
If the history of financial reporting relating to mortgage rates is any indication, you actually might want to wait to lock your rate if the pundits exclaim that interest rates are going up…(laughter fills the room). All bad jokes aside, there is no way to predict with any degree of accuracy, where mortgage rates will go. In fact, at the present, we are near all-time lows for mortgage rates. If you already have a significant benefit available at the current low rates, how much do you think rates will fall, if they do drop again? Most likely, rates will not drop much further from the lows of this year.
It’s boils down to risk and reward when it comes to locking your rate. Depending upon the current benefit available and the current state of mortgage rates, the borrower stands to risk a large benefit by delaying a rate lock for a relative small reward if rates drop further.
Declining home values across the US are create another valid reason to lock your rate while the getting is good, and the timeframe for you new home loan is long-term.
The continued decline in home sales, makes each current home sale (sale of a comparable home to yours) in your area, that much more critical in how it affects the appraisal value of your home. For instance, if home sales in your area have been low for the previous 12 months and a couple foreclosure sales come through at rock bottom prices, your home stands to lose appraisal value for refinance Loan-to-Value (LTV) qualification purposes.
It is not uncommon that people wait to lock and their home value declines in the interim, raises their LTV, and makes the current refinance program a worse scenario than if they had locked when market mortgage rates were higher.
The LTV grading tiers for qualified interest rates are tightening, which makes home value a crucial decision point for rate lock decisions. Not to mention the huge impact of a declining home value for the homeowner that is currently at or near an 80 percent LTV.
The recent lender reductions in refinance cash-out caps, also makes home value king for qualifying LTV’s near 85 percent.
The moral of the refinancing story in today’s market is that if you have a pre-qualified loan program that gives you the benefit that you want or need, it would be wise to think twice about risking your “Bird-in-the-Hand”, for visions of a future drop in mortgage rates.
May the Mortgage Refinance Rates be with You!
Refinance Tool Box
Labels: business, credit scores, economy, finance, home loans, money, mortgage rates, refinance, refinance rates, refinancing
posted by Jim Bisnett at
1:09 PM
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