Over the weekend many market analysts and gurus were trying to guess and predict what would happen to interest rates in response to the credit downgrade.  If you were to read a book on the economy or bet on the most likely outcome, you would have predicted, just like the pros, that interest rates would be higher today.  Here is how you look at why that would happen.  Suppose you were lending someone money who had perfect credit and no likelihood of not being able to pay you back, it was almost guaranteed you would get your money back plus the interest.  You would probably give them a very low and stable interest rate in return for them not being a risk to you or your money.  Now suppose that you had a very good reason to believe that the once perfect credit person you were lending money to, would perhaps not be able to pay you or would maybe miss some payments here or there?  Would you want to keep lending them money at the same interest rate or even the same large amounts?  Most likely no!

Well this is how countries, investors, and institutions that were buying US treasuries were expected to react this morning.  One would think they would all start taking money back from the US and this would in turn put the US in a tough position and would ultimately increase interest rates.  However, interestingly enough money poured into US treasuries today and drove VA interest rates lower!

One thing that is worth noting however is that VA mortgage lenders did not pass on a lot of the gains interest rates had today, but instead are in essence sitting on the side lines to see what happens tomorrow.  Normally with as big of a rate rally as we had today interest rates on VA loans would have gotten better than they have, but VA mortgage lenders are waiting to see what tomorrow brings.  The Federal Reserve has their FOMC meeting on interest rates tomorrow too!

Here is to lower VA interest going forward.

A 620 Fico score or home appraisal no longer needed

If you have already tried to refinance under this loan program and failed, it would most likely benefit you to try to refinance again. As of April 18, 2011, the rules have changed for refinancing with the VA Streamline Refinance Program. Previous failed attempts might not be a problem for you now.

A Fico score of 620 or an appraisal is no longer needed. Also, this loan addresses the difficulties with your current VA loan being more than what your home is worth.

Some VA interest rates are as low as 2.75 percent with an APR of 2.45 percent. These rates are historically at low amounts. In many cases, hundreds of dollars can be saved each month on your mortgage payment.

Quick and easy loan approval

The VA Streamline Refinance Program is designed for active and inactive military personnel to take advantage of the very low interest rates. It was set up to make it easy and quick. Also, there are some places that will pre-approve you in just 60 seconds.

Other qualifying features that this loan has are:

Your existing VA loan has to be up to date on its monthly payments. You can not be behind.

There cannot be more than one-30-day late mortgage payment made on your existing VA loan within the last 12 months.

Employment and income verification will probably be needed.

A refund of your existing escrow account can be made to you.

You cannot receive any cash back funds from the refinance.

After the loan is approved, you can skip up to two monthly payments.

American military personnel and their families can widely benefit from the VA Streamline refinance of their existing VA loan, especially since the VA interest rates are very low. It will just save a lot of money each month for them. They can use the financial boost to help get caught up on other important bills. Families can stop skimping on their food, clothing and medicine expenses. Reducing monthly mortgage expenses will ease the money crunch that seems to be never ending.

The VA streamline loan is only available to those who already have a VA loan. There are a lot of advantages to streamlining your VA loan:

• No appraisal required!
• The VA does not require you to credit qualify.
• No down payment, and all closing costs are rolled into the loan, so you bring nothing to closing!
• Lowering your interest rate and monthly payment can save you money every month.
• You don’t make a mortgage payment for two months after you close, saving you two month’s worth of mortgage payments!
• You can choose to reduce the term of your loan (i.e. Go from a 30-year to a 25, 20, or 15-year loan) to save thousands on interest over the life of the loan.
• You can refinance from an Adjustable Rate Mortgage (ARM) to a Fixed rate, avoiding costly interest rate hikes when the ARM rate adjusts.
• You can refinance from a fixed rate to a VA 3/1 or 5/1 Hybrid ARM, lowering your interest rate and monthly payment considerably.
• The streamline process is painless and relatively quick. You could be refinanced in just a few weeks and saving money!

Rates are at an historic low right now, so if you have a VA loan, chances are good that you will be able to benefit from lowering your interest rate with a streamline refinance.

It is absolutely insane how low VA interest rates have gotten.  I have been doing VA streamline loans for the past 15 years and though YES it is tougher to do a VA streamline loan today than it was yesterday, VA interest rates are so low that I, an industry veteran would have bet the farm that they would never have gotten this low!  For years, in order to take advantage of the absolute LOWEST Rates possible, you would have to pay points and closing costs.  In essence this is not a bad thing, and we have posts that explain why paying closing costs actually makes sense.  However, due to some recent changes in the law and what VA lenders want, many VA loan officers cannot charge some of the fees that they used to be able to charge.

If you have not refinanced before due to closing costs I promise you that you should contact a VA loan officer immediately or apply online at LowVARates immediately to take advantage of this unique situation you have.  Because VA interest rates can change daily I am always hesitant to quote rates but would like to give you a range of what VA loan officers that I know are quoting today:

4.25% 30 yr fixed with little to no points

4.5% with no Lender fees at all

4.75 true NO COST loans.

The VA hybrid rates are around 3.25%

Please do yourself a favor and take advantage of the VA streamline loan which today is truly your diamond in the rough.  Our economy sucks, it really does and I know it will get better, but until then all military home owners with a VA loan should refinance now.

If your current rate is at 4.75% or higher there is no reason to not take advantage of the no cost or no point VA refinance loan.

Veterans who currently have a VA home loanneed to be advised that in February of 2009 some of the VA approved lenders at LowVARates have loosened or lowered their lending standards making it much easier to qualify for VA loans. 

Veterans that have applied for loans in the past may for one reason or the other been told they could not qualify, however with these recent changes it may now be possible to take advantage of the historically low VA loan interest rates that are still available.

I can see how reading this title at first might lead one to think this post was meant for people who work with or for me. I share this here to give my veterans an insight into my personal philosophy and how when it comes to giving a veteran the best deal and best service I can, our interests are more closely aligned than one might think.

The following then represents the steps I take on every VA loan.

1. Get the data and identify the veteran. This information gives a context to a veteran’s motivation for investigating a loan. Sometimes a veteran is unaware of the best option or, in some cases, convinced an alternate option is better than what you suggest. This helps frame basis of your advice. Questions might include: How much debt do you have, how much do you owe on the home, what is your payment.

2. Find out the veterans goals – This can be open ended: What are your intentions with a potential VA refinance? Or pointed requiring a yes no answer:

· “Are you looking to free up money to pay down other debts?”

· “Are you looking to free up money to supplement your income?”

· “Are you looking to pay the home off faster?

3. Check the time – “What is the minimum amount of time that you are sure you will own the home?” This question provides scope to the mortgage options you present.

4. Run the numbers & create a plan – At its most essential, a refinance is an investment. You agree to pay/add a certain amount of closing costs in exchange for an incremental savings over time. When the cumulative amount you have saved has equaled the costs of the refinance, you have achieved the “breakeven point” in the loan. From this point forward any savings experienced are now “true” savings. The optimum quote will be one where the loan program, rate and fee combination saves the veteran the maximum amount of money between the “breakeven point” and the end of the length of time they were sure they would own for.

5. Identify the risk – By determining the potential risk, advantages and drawbacks of the various options available you alleviate unknowns. Unknowns create uncertainty, and uncertainty prevents good decision making. A fixed rate loan is often thought to be the safest loan available, but not necessarily for someone who has a large amount of higher interest rate credit debt. By taking a VA Hybrid ARM, the veteran might save significantly more. Since credit cards calculate the interest rates on the ending monthly balance, the faster one pays off credit card debt, the more money they free up each month. I have often been able to show veterans how paying off credit card debt faster can free up enough money to offset the maximum “worst case” rate/payment they could ever reach on the loan.

6. Clarify details and explain the options – encourage the veteran to ask questions. It is often the case that veterans object to the Hybrid ARM simply because it is an ARM. To disregard all ARM loans simply because of the ARMs with unfavorable terms that have hurt many homeowners is like refusing to ever drive a car simply because Toyotas are currently being recalled.

7. “You sell ME.” – If a loan officer has completed the preceding steps perfectly, then a sale is no longer the issue. Once you have devised a plan that best meets their goals, mitigates their fears and ultimately saves them the most money, you are talking about common sense. Though I don’t directly ask this of my veterans, my philosophy is “you sell ME as to why you shouldn’t do this.” In my experience, following these steps through with this approach helps the veteran arrive at a clear and meaningful decision.

Veterans have many loan options and there are many lenders and brokers who they could work with and may even be able to offer the same deal you can. Following these simple rules help me to distinguish myself among the choices, and hopefully earn their business.

This blog post will be short and sweet because I want the video above to do the talking.  That said it is very important that any veteran home owner eligible for a VA streamline loan or even a VA cashout loan be aware that 4.5% VA rates have returned once again to the market!  Most of the approved loan officers here at LowVARates would have never guessed that we would have seen this low 30 yr fixed rate return, but we are all certainly happy that it has.  The FED will stop buying mortgage backed securities is just about a month, so we do not expect interest rates to stay this low much longer.  If you have been waiting to refinance, YOU BETTER DO IT NOW.

It was then reported home sales hit a low in January, making a new record, which goes to show it will be hard to improve our fragile economy even with the government’s assistance. It fell 11.2% in January, which is the third consecutive month it has dropped, even though Economist was predicting an increase. Not only that, but unemployment is at 9.7%, foreclosure of homes are still at record highs, and it is extremely hard for businesses and individuals to get loans.         

It also was reported that as an effort to increase the economy’s situation, that a bill was passed to help produce more jobs. Not only that, but legislation is planning to help businesses by giving tax breaks to those who choose to help our economy by hiring more employees.

Ben Bernanke promised that the Fed would keep the interest rates as low as possible (near zero) for an “extended period.”  Some think that this “extended period” will last a few months. There will come a time when this will have to reverse once the economy is on more solid ground. The timing is tricky, as waiting too long can cause problems such as inflation, whereas raising rates too soon can disrupt the improvement that will be made.  Bernanke also urged the Congress to act on restoring the nation’s financial structure to avoid events that, in Dec 2007, put us in a recession.

Due to Chairman Ben Bernanke’s speech on February 24, 2010, the Tuesday drop of 101 points was raised on the Dow Jones on Wednesday (the day he gave his speech) by 100 points. This has been great news to the mortgage market! These lowered rates will continue to improve our economy. Our economy is recovering, but since it is still very weak and fragile, the lowered rates need to stay low.

Veterans please keep in mind that interest rates on VA home loans are normally .25%-.50% lower on VA loan than loans made to civilians.

The second place I would look to save money is insurance. Shop around for car insurance, take a higher deductable, get rid of unused protection so you can reduce your monthly premiums. I would also recommend shopping for cheaper health insurance, and homeowners insurance.  Did you know that installing and having a monitored home security alarm in your home could save you 20% on your home owners insurance costs?

I would next look at what seems to be costing a lot of money that perhaps you could live without. How much are you spending on going out or entertainment, set a reasonable budget and limit yourself to those set amounts.

It’s difficult to say what direction the va rates will move this week, next week and beyond. The economy is recovering so we could see rates continue to rise to the 6.5% levels as investors continue to put their money into the stock market.  At the same time, there are many unknown factors. The government has been pumping allot of money into the housing industry buying up bad loans. This could cause rates to fall back down as more investor money is made available. Some investors don’t like the risk of the stock market and prefer to keep their money invested in real estate which traditionally has always been the safer investment. More money in the bond market means lower rates.

What you need to consider is the difference in monthly payment and your current needs. On a $200,000 loan the difference between 5% and 6% interest rate is $125.64 a month. If you can’t afford the increased payment then you simply buy a slightly cheaper house. For instance:

$200,000 at 5% equals a $1073.64 Principle and interest payment (not including taxes and insurance)

$180,000 at 6% equals $1079.19 Principle and Interest payment.

So you buy a home today that is $20,000 cheaper, but because of the current housing market conditions and the fact many home values have dropped 20% or more, you’re really getting a $216,000 dollar home for the price of $180,000! So you’re still in a better position to buy now as rates increase than risking the wait for rates to come back down while home prices rise during the economic recovery period.