Home Owner Refinancing News

Freddie Mac expects cash-out activity to remain healthy for the remainder of this year. Currently, 30-year fixed-rate mortgages are are down 40 basis points from their high of 6.8% set in July, according to Freddie Mac. From January 2003 to June 2006, home equity growth ranged from 32% to 200% across the country.

Quarterly home appreciation rates have slowed for the first and second quarter of 2006 to 2.20% and 1.17% the slowest appreciation rate since the fourth quarter of 1999. Slowing home appreciation rate in combination with higher interest rates would slow mortgage equity financing activity. So it's no wonder the fed are contemplating leaving rates untouched. still at present home equity refinancing is robust and should continue as such for a time.

The low rate refinancing resource Refinance Home Loan Rates reports that in recent weeks mortgage rates took a nose dive to level not anticipated. From 6.10% to 5.74% according to the Mortgage101 mortgage rate survey. Now rates are slowing creeping up. But with talk that the fed is considering leaving rates untouched for a time this may spell a fair to good market for homeowner refinancing. figures indicate that over 20% of homeowners did not refinance their homes.

What's In A Word? Defining Home Refinancing

Many a homeowner has been completely stumped by exactly what home refinancing perports to be and how interest rates figure into the process. This is especially so when we consider the need to lock in rates while waiting for the loan to fund.

The Fed has gone to great lengths to revise the definition of refinancing in order to produce more accurate reporting of loans.

Let's take the time to define home refinancing using a number of dictionary and see what light is shed by definition.

If the loan/application is to satisfy and replace an existing loanand both the old and new loan/application is secured by a lien on a dwelling it must be reported as a refinancing.

Therefore a refinancing is a new home purchase loan that satisfies and replaces an existing loan by the same borrower, in which the existing loan is a home purchase loan, and both the existing and the new loan are secured by first liens on dwellings.

Tips: Home refinancing can reduce current interest rates on the mortgage and lower monthly payments while providing cash to fund other projects for or apart from the home.

A -B Acceleration (Mortgage) - Blanket Mortgage

Acceleration (Mortgage)
The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale Clause.

Adjustable rate mortgage (ARM)
Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the re negotiable rate mortgage or variable rate mortgage.

Adjustment interval
On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

Amortization
Means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.

Annual percentage rate (A.P.R.)
Is a interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account point and other credit cost. the APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

Appraisal
An estimate of the value of property, made by a qualified professional called an "appraiser".

Assessment
A local tax levied against a property for a specific purpose, such as a sewer or street lights.

Assumption
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.

Balloon (payment) mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

Blanket Mortgage
A mortgage covering at least two pieces of real estate as security for the same mortgage.

B - C Borrower (Mortgagor) - Credit Report

Borrower (Mortgagor)
One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Broker
An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Buy-down
When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.)

Caps (interest)
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (payment)
Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility)

Certificate of Reasonable Value (CRV)
An appraisal issued by the Veterans Administration showing the property's current market value.

Certificate of veteran status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time) It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

Closing
The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement. closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount.

Commitment
A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. an agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Construction loan
A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

Contract sale or deed:
A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

Conventional loan
A mortgage not insured by FHA or guaranteed by the VA.

Credit Report
A report documenting the credit history and current status of a borrower's credit standing.

D - E Debt-to-Income Ratio - Escrow

Debt-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.

Deed of trust
In many states, this document is used in place of a mortgage to secure the payment of a note.

Default
Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred interest
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization

Delinquency
Failure to make payments on time. this can lead to foreclosure.

Department of Veterans Affairs (VA)
An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.

Discount Point
see points

Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount.

Due-on-Sale-Clause
A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

Earnest Money
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Entitlement
The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility.

Equal Credit Opportunity Act (ECOA)
Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity
The difference between the fair market value and current indebtedness, also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property.

Escrow
An account held by the lender into which the home buyer pays money for tax or insurance payments. Also earnest deposits held pending loan closing.

F - G Fannie Mae - Guaranty

Fannie Mae
seeFederal National Mortgage Association.

Farmers Home Administration (FmHA)
provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Bank Board (FHLBB)
The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision

Federal Home Loan Mortgage Corporation (FHLMC) also called "Freddie Mac",
is a quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

Federal National Mortgage Association (FNMA) also know as "Fannie Mae"...
A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

FHA loan
a loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans ($155,250 as of 1/1/96), they are generous enough to handle moderately-priced homes almost anywhere in the country.

FHA mortgage insurance
Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

FHLMC
The Federal Home Loan Mortgage Corporation provides a secondary market for savings and loans by purchasing their conventional loans. Also known as "Freddie Mac."

Firm Commitment
A promise by FHA to insure a mortgage loam for a specified property and borrower. A promise from a lender to make a mortgage loan.

Fixed Rate Mortgage
The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.

FNMA
The Federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as "Fannie Mae."

Foreclosure
A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

Freddie Mac
see Federal Home Loan Mortgage Corporation

Ginnie Mae
see Government National Mortgage Association.

Government National Mortgage Association (GNMA)

Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Guaranty
Apromise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

I - H Investor - Hazard Insurance

Hazard Insurance
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

Housing Expenses-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. See debt-to-income ratio.

Impound
That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index
A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average costs-of-funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interim Financing
A construction loam made during completion of a building or a project. A permanent loan usually replaces this loan after completion.

Investor
A money source for a lender.