Houston Refinance Resource was created to give you valuable insight and to assist you whether you are thinking about the purchase of  your first house, or if you are already a home-owner and are simply looking for someone to explain refinancing a mortgage to you. We really hope you will find the information here helpful in your endeavors.

Considering that right now the national mortgage rate average is hovering in the 5% range, you need to ask yourself not only when you’re going to refinance, but how to get the best deal.

People everywhere are asking the same question; how to get in on these incredibly low mortgage interest rates and who offers the best deal on a mortgage these days. The thing is, most people aren’t even able to get through to their existing lender when they try to call. Understandably, people are getting frustrated.

Believe it or not, it could take as long as 3 months for the mortgage market to be back to working normally, according to what one expert at Fannie Mae believes. His full year outlook for mortgage rates is 4.8 to 5%. The main message here is to not panic. It will take some time to get a mortgage done, but that shouldn’t be a problem.

Some things to remember

1. Realize this is a great opportunity

Bottom line – this is a fantastic opportunity. A 30 year fixed mortgage rate is currently at, or below 5%.The ‘normal’ rate, in historical terms, is in the neighborhood of 8%.. And that is significant.

Let us have a closer look at it. First, without going into too much detail to calculate mortgage payments formula, let’s take a 30 year fixed mtg at 4.6%. If you took out a 30-year fixed loan of $170, 300 (this is about average for a home loan across the US) if your interest rate was 5%, you would be paying roughly $915.And at 8% you would pay $1,250. What’s the difference? Three hundred thirty five dollars per month; that’s about $4000 a year.

2. Be wary

Be prepared for the fact that it’s going to take longer to get through the refinance process these days. That’s just something you’re going to need to accept.Something else to be prepared for is the fact that Fannie Mae and Freddi Mac have apparently raised their fees.

So don’t be surprised to find that you’re paying one to two percent more of the loan amount in the way of fees, possibly even more than that in addition to all the closing costs normally accounted for.

3. Locate the most competetive rate

Having enough equity is one of the biggest obstacles. Today you’ll need 20% or more in equity to qualify for the best rates.

You’ll also want to be sure your credit score is as clean and high as it possibly can be. Get copies of your credit report to make sure there are no errors at annualcreditreport.com.

Talk to several mortgage lending companies to be sure you feel comfortable with who you’ll be working with as well as getting the most competitive rate possible. Put all your paper work in order beforehand. The following is a basic list of the documents you’ll need:

Your refinance application, tax returns for the past 2 years, 1 month’s worth of paystubs, 3 months of bank statements (checking, savings, mutual funds), your most recent mortgage statement and finally, a copy of your deed.

Doing these things to be ready for your Houston refinance or purchase loan should put you in great shape to get what you want out of your new mortgage.

Refinance Options – The Making Home Affordable Program

This program was instituted by the Obama administration last year with the goal to help Americans who are having difficult times making their mortgage payments due to financial hardships. Basically, the goal of the program is to help homeowners to either refinance or modify their existing mortgage to an amount less than 31% of their pre-tax income levels. Requirements to qualify for the program include the following:

• You must be living your home, and the home must be your primary residence
• The current payment (mortgage, insurance, taxes) need to be more than 31% of your PRE-tax income.
• You had to have purchased your home before January 1, 2009
• Are currently having a hard time paying your mortgage due to a financial hardship

There are obvious benefits to this program. First and foremost, if you qualify then you can get the help you need to lower your monthly payments via refinancing your home with a lower interest rate or by extending the term of the loan. Second, it is free. The lender and the loan servicer will pick up the tab.

Refinance Options if You Don’t Qualify for the Program

If you don’t qualify for the Government’s program then you still have a few different options. Sit down with your banker/lender ASAP. The sooner you sit down and get their advice the better, as you will have more options now versus if you put it off until foreclosure is pending. These options include:

• Traditional refinance. Just because you don’t qualify for government assistance doesn’t mean you can’t refinance your home in Houston. Of course, this can be difficult to do if you are under water on your mortgage (i.e. you owe more than the home is worth), but fortunately housing prices have not come down nearly as much in Texas as they have around the rest of the country.
• Repayment Plans. These are plans that allow you to make up your delinquent payments in small amounts over a specified time period.
• Forgiveness. This option entails the lender forgiving part of the loan. For example, if your home is worth $150,000 and you owe $165,000 the bank may be willing to modify your mortgage down to the current market price, or something closer to it in order for you to stay in your home and not go into foreclosure, which is expensive for the bank. Their can be a potential issue with this if you have a Houston home equity loan, as many times that loan would have to be written off completely in order to adjust your primary mortgage down.
• Forbearance. With forbearance, you will still owe the full amount of the loan but will be able to pay part of it back later. However, this may change your payment structure and leave you with a balloon payment due at the end of the mortgage.

Things NOT To Do If You Are Having Trouble Making Your Payments

The first thing not to do is panic. Remember two things: First, banks don’t want you to foreclose on your home just as much as you don’t want to….and this is a huge advantage that you, as the borrower, have in this situation. Second, the situation in Houston, Texas is not as bad as the rest of the country. According to the most recent Case-Shiller Home Price Index, home prices in the Texas area (we had to use Dallas data, which is fairly comparable to the Houston market), home prices are down only 5.90% from their peak:

The second thing is to not settle for a short-term fix. Many lenders will offer an immediate cash loan to help you ‘get by’ for a couple of weeks. However, even if the loan is a small $1000 loan, it’s probably not a good financial decision, will only prolong the issue at hand, and cost you quite a bit in the interim. It really is best to solve the problem now given the government programs available and the current low interest rates on Houston mortgage refinancing.

should keep in mind.  Just because interest rates remain extremely low and you may be hearing a lot of noise about the fact that you need to act now before rates go up, doesn’t mean that refinancing is the right thing for you to do right now.

Something you need to keep in mind when it comes to refinancing a home mortgage is that you are literally getting an entirely new loan on your property.  This means that you’ll have to go through all the same processes you went through when you got your current loan.  And this includes many of the same expenses such as getting an appraisal, paying title fees and closing fees as well as paying the lender some fees to undertake the whole process.  Considering all these expenses can add up to a pretty significant amount of money, you really need to figure out whether it makes sense for you to refinance right now or not.

If you are wondering how to know if it would make sense for you, there are a couple of routes you can take.  Probably the best route would be to talk to an honest, professional mortgage advisor.  While the industry as a whole has taken a lot of heat over the past few years regarding shady practices, the truth is that there are a lot of good, smart, honest and hard working loan originators out there who would be happy to answer your questions, even if it doesn’t mean they’ll make any money from you.

You see, if they give you good information and don’t pressure you to go forward with a loan that you don’t need, you will probably be impressed with their professionalism.  And while you a good loan officer won’t try to pressure you to buy a loan you don’t need, they may very well ask you to keep their name in mind in case you hear of anyone else considering a home financing.  They may even ask you to take a few of their business cards to pass along, should the opportunity present itself.  This is normal as a good loan officers’ business is largely built from a referral base.  If they have taken the time to answer your mortgage questions without pressuring you to purchase a loan, then do the right thing and share their good name with the people you know.

If you don’t know of any good, reputable mortgage lenders, ask around.  There’s a good chance someone you know knows a good lender and will be happy to share their name and contact information with you.  Another option is to go to Zillow.com’s mortgage market place.  There you can look up lenders in your area and see what kind of customer feedback they have received.  Clearly some are better than others.  The good thing about this website is that you can submit a scenario and have multiple lenders provide quotes to you, but you remain anonymous.  In other words, you won’t get barraged by phone calls and emails.  Instead, if you see a quote and a lender that you like, it is up to YOU to reach out and contact them.  Quite a good concept, if you ask me.

Finally, if you want a little background on when is a good time to refinance after mortgage purchase, you can check out this page about “when to refinance rule of thumb”.

The old standard ‘rule of thumb’ for refinancing stated that if you could reduce your interest rate by 2% or more, then it made financial sense and you should move forward with a new loan.  Another common standard calculation was as vague as saying that as long as you could achieve a ‘significant’ savings to your monthly payment (they stated that $200 a month was enough for ‘most’ people), and that you weren’t adding more than 5 years to the term of your loan, then you should go for it.

The basic question that needs to be asked, and that is quite honestly NOT asked very often, is, “How long do you plan to be in this house (or more specifically, on this mortgage)?”  You see, if someone knows that they will be moving in a year, I don’t care how much of a monthly savings they can get… It’s probably not going to make sense to refinance!

Remember, when you refinance your mortgage, you’re getting a whole new loan.  This means that you have to go through all the steps, all the processes, and all the costs involved as when you got your first mortgage (well, except for a home inspection that you probably had to pay for when you purchased the home. That will not be necessary in a refinanced loan).  You will need to pay for an appraisal, Title and escrow fees, origination fees, etc.  Depending on the size of your home loan and where you live, these costs could easily add up to several thousand dollars.

This is where you need to begin calculating whether this will make sense for you.  You need to know where your break-even point is in relation to the monthly savings you will gain as opposed to the up-front expenses you will incur to get the new loan.

Let’s look at some simple numbers as an example.  Let’s say that it would cost you $3000 in expenses to get a new home mortgage.  Whatever your current rate is or your new rate would be, let’s also say that you would be saving $200 per month.  If you divide 3000 by 200 you get 15.  That means that it will take you 15 months to break-even.  In other words, your $200 monthly savings every month takes 15 months before it covers the expense incurred of $3000.  From the 16th month on, you are truly saving $200 per month.

As you can see, if this was your scenario and you knew that you were going to be moving out of your house within a year, you wouldn’t have time to recover the money you spent with the money you are ‘saving’.  After 12 months, you would have ‘saved’ $2400… but remember, you spent $3000 to get those savings!

You can never know exactly what the future holds.  However, you can often get a general sense of whether or not you think you will be in your current home for a year, a few years, or for many years to come.  Make sure to factor that into your equation when you are looking to find the answer to your own personal “When to refinance rule of thumb.”

You might be wondering how in the world this could be possible.  The answer is simple; between a housing boom that was going on a few years ago at the same time as massive reconstruction due to extra severe hurricane seasons in the south east, US home builders, general contractors and remodelers were having a tough time securing enough drywall.  China came to the rescue with additional supplies to meet our needs and keep the construction and mortgage markets churning.  Unfortunately, it has become clear that some of that supply was tainted.  The question for many people is, what about Lowes Chinese drywall?

Let’s take a closer look at what happened…

While the US usually produces more than enough drywall for our own needs, in this situation of high need it was necessary to import additional drywall from China; about 550 million pounds of it.  This is enough to build about 60,000 average sized homes.  The problem is that in 2009, many homeowners who have walls made of Chinese drywall have reported a range of health issues including respiratory tract infections, headaches, sinus problems and nose bleeds.

It has been determined that through the use of laboratory tests that several volatile chemicals are emitting sulfurous the gasses carbon disulfide, carbonyl sulfide and hydrogen sulfide.  If the names alone don’t scare you, the fact that this stuff smells like rotten eggs and is coming from your wall certainly will!

On top of the smell and headaches is the fact that it will corrode anything made of copper when it comes into contact with it.  This can include copper wires or copper plumbing in your walls.

Is it any wonder mortgage lenders are wanting to look into the materials in your walls now?

Drywall is typically made by pressing a plaster-like material made of gypsum between layers of heavy paper and then kiln dried.  While there are numerous theories of what happened with the Chinese drywall, one of the main suspicions is that they used fly ash.  Fly ash is a waste material that is a by-product of coal burning power plants and contains strontium sulfide.

Strontium sulfide can have various detrimental health affects including negatively affecting bone growth in developing children.  Chronic exposure to the gasses being emitted can also lead to problems with the central nervous system, cardiovascular health, kidneys and liver as well as eyes and skin.

No doubt about it, this is nasty stuff…

The good news is that it has been determined that none of the defective Chinese drywall was sold at either the Home Depot or Lowes.  If you know that the drywall in your house came from these sources, then you have nothing to worry about (and you shouldn’t have any issues obtaining your new mortgage).  On the other hand, if you are not sure of the source of the materials used in your home and you have been suffering from some of the issues described above, especially if you live in the southeast and have noticed smells increasing as the heat and humidity increase, you may want to contact your local Department of Health for more information.

Due to all the above concerns it’s not surprising to learn that more and more contractors and Do It Yourselfers have been asking, “Where can I buy drywall online”.  And why mortgage lenders are eager to see proof of where materials used on homes (in the southest) which have had work done on them recently, came from.

One thing to keep an eye on this week is that many financial sector companies will be announcing their quarterly earnings numbers.  At least one well respected Wall Street analyst, Meredith Whitney, is currently making statements about the financial sector in general that are fairly positive.  Part of the ‘good news’ according to her is that for mortgage servicers, loan modifications are actually helping them more than the typical mortgage refinance route that many homeowners would go through to improve their rates.  This is because through a modification, the servicer not only retains the loan in their portfolio rather than giving it up and losing money on an up-front release premium, but they also extend the duration of the loan.

Oh, and if you’re wondering why Meredith Whitney is well respected, one reason might be that she was one who made early and accurate predictions about the troubles and eventual demise of many of the financial companies.  Hopefully is she got it right back then with the negative sentiment, she’ll get it right again this time with a more positive sentiment.

Hopefully you haven’t been sitting on the sidelines with your dream house in your crosshairs, but waiting for the rates to come back down to where they were back in April and May.  Seriously, if this describes you, and there is a house that you want to buy and you know that you are qualified, have the down payment money ready, your credit is in good shape, etc etc… don’t sit around hoping to see those mortgage rates of 4.5% to 5% again any time soon (if ever again at all).

The same goes if you happen to be considering a Houston refinance.  Rates are still low on an overall historic scale, so don’t let the fact that you probably missed the very bottom of the barrel pricing.  Just lock your loan and move forward.  In fact, I have a video here that should help make things a bit more clear for you if they’re not crystal clear quite yet.  I hope it helps.

The mortgage crisis.  The housing crisis.  The economic crisis.  Recession.  Job losses.  Bankruptcy.  Falling property values.  Foreclosures.  Man…  Isn’t there ANY good news out there?!?!

Well, if you happen to be in a position to buy a house – you have a good job with steady income and have a good (or at least decent), credit history, now is a great time to be looking to buy a home.  Times are even better if you’re a first time home buyer because you can take advantage of the government’s $8,000 tax credit.  That’s not ‘like’ free money, it IS free money!

The great thing about the FHA first time home buyer incentive is that now you won’t even need to wait until you file your taxes to get the benefit of the money!

For a while it looked like the government was going to try to allow people to use that money as a down payment source, but fortunately they decided against it (wisely).  After all, letting people buy and move into homes with nothing down, no skin in the game, is part of what caused this whole mortgage crisis to begin with.  Applying the same principle to try to solve the problem just doesn’t make any sense (not even to the government!)

So while you will have to come in with at least 3.5% for a down payment, that money can come from where ever you want; your savings or even from a gift from a friend or family member.  The only stipulation is that it has to clearly be a gift and not a loan.  In other words, you can’t be expected to pay it back by whoever is giving you the money.  Of course you can pay them back if you want; they simply can’t have you under contract to do so.

So once you have your 3.5% to put down on your house, you can use the government’s $8,000 gift in a number of very useful ways.  For instance, you could put it towards making a larger down payment, thereby reducing the total amount of the loan you will be paying on.  You could also use the money to pay closing costs so you don’t have to come to the table with any cash.  Or… you could use it to buy down your interest rate by buying discount points.

Obviously you don’t need to know how to calculate mortgage payments formula to recognize that there are a lot of very powerful ways that you can put that money to work for you right away, making the idea of becoming a home owner not only more appealing, but more manageable for many people. So remember this when you ask yourself, “who offers the best deal on a mortgage in Houston?”…  Even if mortgage rates in Houston are going up, lower home prices and this government incentive still make this a great time to buy a home.

But remember, this offer is only good until the end of 2009, so order now!  — Sorry… too much TV infomercials I guess.  But the truth is that this deal is only good until the end of this year.

Once you’ve established that you can do a Houston refinance, and that it makes sense for you to do so right now, the next question will be; what to do with the savings you’ll be getting. While that might sound ridiculous, if you don’t make a plan for what to do with that extra cash, it will just ‘disappear’ into your day to day expenses and will never have the kind of impact on your life that it could.

In earlier articles we covered a couple of different approaches to what you might do with that money. In each example we used the hypothetical number of $175 in monthly savings from your new, lower rate Houston home loan. While that much money is nothing to sneeze at, it’s probably not going to get many people overly excited either. On the other hand, we showed that with a bit of disciplined effort, it could become something quite substantial that you could legitimately get excited about.

In example number one, we used the additional money to pay down credit cards carrying balances. In that example we used two credit cards; one with a $4000 balance at 16% and the other at 12% with an $8000 balance. We showed how you could apply the new savings to the minimum payments each month and shorten the pay back period from 23 years to just over 4 years.

In example number 2 we took the savings and applied it towards the principle on your Houston mortgage to help pay it off more quickly. Our example was of a loan amount of $225,000 at 5% fixed. By applying the $175 to the principle each month you would be able to shave over 7 years off your mortgage. That equal over $58,000 in interest you wouldn’t be paying.

The third option we want to discuss is investing that money each and every month. The investment goals could be anything from your retirement to a vacation to a child or grand child’s college expenses. Your investment motivations are completely your own; we simply want to show you what could be accomplished with this money.

In trying to predict what kind of return you might get from an investment, we have to make some guesses. We’ll use conservative numbers to be safe.

Let’s say that you start of with $2000 in an investment account and you’re going to add that $175 to it each month for the next 18 years (planning for a new child’s college expenses). We’re going to use a conservative annual rate of return of 7% for this example.

So what does baby have waiting when they turn 18? A bit over $83,000! I think most people would agree that that is a pretty good college fund to get started with.

Let’s say that instead of college for a child, you’re a 30 year old looking to retire at age 65. We’re also going to say that this account is starting off with a balance of ZERO, but it gets the $175 savings added to it each and every month. Given this situation, if you did nothing else for your retirement, by the time you were 65 years old this account would have over $300,000 in it. Again, not too bad.

Of course these are very ‘rough’, hypothetical numbers. However, they are very attainable. If they have whet your appetite at all for what you might be able to accomplish, you really should sit down with a Houston mortgage lender as well as an accountant or financial planner.

The main take-away here is that while savings may seem like ’small change’ at first, if you can be disciplined enough to apply those savings to a PLAN, you can have a major impact on your overall financial picture. Your Houston home mortgage is more than a bill; it should be part of your overall financial plan.

Let’s run some numbers based on an assumption that your new Houston mortgage will be a fixed rate mortgage on a 30 year term. Also for the sake of argument, we’ll say the new mortgage is saving you a total of $175 each month. A bit less than $200 is a nice addition each month, but nothing to get overly excited about, right? Well, it depends… what are you going to do with that money?

One option that we discussed in a previous example was paying off other debts, such as those on existing credit cards. In that hypothetical scenario we used the numbers of two cards with balances of $4000 and $8000 at interest rates of 16% and 12% respectively. We also assumed that you were making just above the minimum necessary monthly payments and that by doing so it would take you TWENTY THREE YEARS to pay them off…. On the other hand, if you were to use your monthly savings to pay those debts, you could reduce the total pay-back period from 23 years to about 4 years, saving you a LOT of money.

Another smart application of that money would be to apply it towards your existing Houston mortgage to help pay down the principle faster. By doing so, you could shorten the length of time it takes to pay it off and save you a whole lot of money. Are you wondering how much you might save? Let’s take a look at some numbers.

We’ll need some specific figures to look at, so let’s set up a hypothetical scenario. We’re going to say that your new mortgage is for $225,000 on a 30 year program at a fixed rate of 5%. If you were to apply that $175 savings each and every month towards the principle balance, you would be able to pay off your loan over 7 years early saving more than $58,000 in interest payments! That kind of money is something to get excited and motivated by!

It’s obvious that the concept of refinancing to a lower rate is very appealing to a lot of people. What sometimes gets overlooked is the true power of what a little financial discipline can do for your long-term financial picture when applied to your Houston mortgage rates. As we’ve all seen in the current economic situation we find ourselves in, a bit of us.

So whether you’re considering a Houston refinance or you’re looking to make a purchase, do your best to look at the power of small but consistent efforts and how it can impact your overall financial picture.