What’s up with mortgage rates? Jeff Lazerson, of Mortgage Grader in Laguna Niguel, gives us his take.
From Freddie Mac’s weekly survey: The 30-year fixed rate continues to drop, improving to 4.12 percent from last week’s rate of 4.14 percent. The 15-year fixed rate dipped to 3.21 percent from last week’s 3.25 percent.
BOTTOM LINE: Assuming a borrower gets the average 30-year conforming fixed rate on a $417,000 loan, his or her payment would be $74 more per month at today’s rate than a year ago. At last year’s rate of 3.81 percent, the monthly payment totaled $1,945, compared with a payment of $2,019 a month at today’s rate.
APPLICATION NEWS SUMMARY
The Mortgage Bankers Association weekly survey reports a 2 percent drop in loan volume.
WHAT I SEE: From rate sheets hitting my desk that are not part of Freddie Mac’s survey: Locally, well-qualified borrowers can get a 30-year fixed rate, no-cost loan for just 4.125 percent. The Fannie Mae agency jumbo (from $417,001 up to $625,500) is at 4.25 percent and no-cost while a true jumbo (over $625,500) is 4.375 percent with no-cost.
WHAT I THINK: It’s no wonder that home improvement is hot, hot, hot!
Affordability is a big challenge for many would be move-up buyers. Your property taxes will increase. You have transaction and settlement costs in the neighborhood of 5 to 8 percent including both the home you are selling and the #home you are acquiring.
And, you need the down payment, which could be especially tough if you have little equity in your current residence.
Let’s say that you just want to remodel, maybe add square footage or do a complete tear down and rebuild (commonplace in the beach cities). The worst, most expensive, hassle-heavy way to finance home improvements is a construction loan.
What if you forgo the construction loan and all of its costs and do this under the nose of your current lender? Or, you do a cash-out refinance to pay the piper and then tear your house apart. Are you violating the terms of your note and deed of trust?
I received a consumer phone call about this very issue – a great question and a #real stumper.
I read through a copy of a Fannie Mae note and deed-of-trust for the first time in a long time. Now, I wish I hadn’t. Lenders have more do’s and don’t rules than those TSA voyeurs at the airport. They can make entry to inspect your property, put you in mortgage timeout through something called an acceleration clause, and make you promptly repair your property.
The good news is nothing in the note that I could find precludes you from doing improvements. In fact, one section explains that any improvements now or hereafter become a part of the property.
Do not assume all notes and deeds are the same. Read through yours if you are curious. Seek legal advice if need be.
As a practical matter, I believe the likelihood of a lender giving you a hard time about improving your property is as likely as a white elephant jumping through your kitchen window.