I am refinancing my home. I owe $151,000, my home was appraised at $131,000. I am refinancing with Quicken Loans. They offered me a a loan at 4.5%, $2,800 closing costs excluding the additional for my escrow. I do have great credit and have never been late with my payment. Seterus owns my loan and does not do refinances. I am having trouble finding someone to refinance my loan since I am not a current customer. Bottom line: Does this sound like a good deal?
Thank you for your question about HARP mortgage rates.
The HARP loans, in many respects are similar to other mortgage loans, with complicated underwriting requirements. Keep in mind that you want a HARP mortgage rate that is a good deal, one that is in the ballpark, but also one that gets you to home plate.
It is frustrating to hear an answer from lenders that they offer loans only to current customers. This is partially due to the backlog that was created while waiting for the March 19 deadline, when the automated underwriting systems were activated. Since your current servicer is not a participating lender, you will need to go through an automated underwriting system, either the Fannie Mae DU Refi Plus loan or the Freddie Mac LP Relief Refinance loan.
Loan rates vary due to a number of factors including market rates, borrower’s creditworthiness, and LTV ratios. Although the HARP eligibility is generous in terms of qualifying for loans, lenders have added extra requirements (overlays) that increase the difficulty of getting a loan and/or the cost of the loan.
In order to help you understand if you got a good deal let’s look at these three factors:
Mortgage Interest rates and fees constantly vary. Freddie Mac publishes a weekly –Primary Mortgage Market Survey- including national and regional data. There data includes 30-Yr FRM (Fixed Rate Mortgage), 15-Yr FRM, 5/1 ARM (Adjustable Rate Mortgage) and a 1 Yr ARM. There figures are an average and rates vary from lender to lender and borrower to borrower, however they give you at least a ballpark figure. Here are rates for 30 Year FRM:
|Date||Interest rate||Points & Fees|
|April 12, 2012||3.88%||0.7|
|April 5, 2012||3.98%||0.7|
|March 29, 2012||3.99%||0.7|
|March 22, 2012||4.08%||0.8|
|March 15, 2012||3.92%||0.8|
Bills.com readers have left numerous comments since the rollout of the HARP 2.0 program and more specifically since the March 19 rollout of the automated systems, which is most relevant to your case. Just as borrowers situations have varied, credit scores, LTV, and mortgage insurance among other variables, so have interest rates varied. Readers have mentioned quotes for 30-Yr FRMs ranging from 4% to 4.75%, with a wide range of closing fees.
The big lenders dominated the market, especially during the period between December 2011 and March 2012, when the HARP 2.0 automated systems were not available. Rates seem to be coming down with increased competition.
It is often difficult to compare interest rates due to their fluctuations and the varying circumstances of the borrower. Underwriting guidelines are technical, complicated, and interrelated. For example, the type of property influences the FICO score required, and the interest rate charged.
Fannie Mae and Freddie Mac set up minimum requirements for HARP eligibility, but lenders often have stricter requirements (overlays). Although the pricing mechanism set up by Freddie and Fannie has caps on the fees they charge lenders, and have waived many of their underwriting representation and warranty requirements, many lenders are still worried about buyback risks. It seems that this is more prevalent in the case of a new lender.
Borrower Related Criteria: The main criteria that lenders look at are your credit score, credit history, and DTI ratio. Paying on time is a pre-requisite of the program and it will not gain you a better interest rate. Lenders, including Quicken Loans, offer different rates based on FICO scores, with a minimum requirement varying from 620 – 720.
Other factors that interface with the offered HARP mortgage rate are your geographical region, LTV and Mortgage Insurance requirements. As noted, lenders have overlays creating stricter barriers to their HARP programs. Sometime, these overlays are relaxed, but used as pricing mechanisms to create different levels of risk and pricing for their loans.
Cost of the Loan: In order to get to home plate, shop around. Whether shopping for a home purchase mortgage or a HARP mortgage, remember to compare apples to apples and oranges to oranges. Even with laws and regulations governing the mortgage industry there is still a lot of confusion regarding costs. In fact, the Consumer Financial Protection Bureau is working to improve the GFE (Good Faith Estimate) and the TIL (Truth in Lending) forms.
Make sure that you compare similar terms including the length of the loan, they type of interest rate (fixed or variable) and the type of payments. I recommend that you compare HARP mortgage rates and costs by dividing them into these categories:
In general, the Quicken Loan offer was in the ballpark. Your 115% LTV (although that has to be verified by the lender) and great credit make you a candidate for a good HARP mortgage rate. Other factors, including your DTI, the type of property, mortgage insurance needs, and your geographical location will make a difference on the rate you will get.
If you have an offer, check to see the cost for a rate lock, and the time needed for the lender to close the deal. Make sure you compare similar costs and my recommendation is to shop around. Bills.