With the low interest rates many homeowners are still thinking about refinancing to lower their monthly mortgage payments.  While this seems like a great idea, there are some things to consider before you embark on this path.  Refinancing is not cheap – have you looked into what it will cost you? How long will you be staying in your current home? If you are moving soon, you most likely won’t recoup the cost of the refinancing.  Does your current mortgage have a pre-payment fee?  To get the exact costs of refinancing please check with your mortgage banker but I have a short list of some of the costs that you will need to consider.

• An application fee, as high as $300, which is non-refundable if you change your mind or are denied
• The loan origination fee which can be up to 1.5% of the loan principal
• Appraisal cost which usually runs $300-$700
• Closing fees which can be as high as $1000
• Title search and insurance which can also be up to $1000
• You may need a survey which typically runs several hundred dollars
• If your current mortgage has a prepayment penalty, you will have to cover that as well and it can be anywhere from 1-6 months of interest payments

Refinancing is a wonderful idea with the low interest rates but you do need to find out the costs and see if it is worth your while or not.

On April 1 this year the FHA mortgage insurance rate (MI) will increase on FHA loans.  If you are planning on getting an FHA loan with less than 20% down, this will affect your loan.  This is just general information, so please check with your loan officer to see how these changes will effect your financing when you purchase your home.

Right now FHA loans have 2 levels of MI:

• Up front MI which is 1% of the loan amount which can be added to closing costs or you can finance it by adding it to your loan amount
• Annual MI which is 1.1% of the loan amount if your down payment is 5% or more or 1.15% of the loan amount if your down payment is less than 5%. These annual fees are paid monthly

Effective April first the MI will change to:

• Up front MI will be 1.75% of the loan amount
• Annual MI will be 1.2% of the loan amount if your down payment is 5% or more or 1.25% of the loan amount if your payment is less than 5%

If you are shopping or a home and are using FHA financing, you need to be under contract by April 1, 2013 to get the current MI rates.  Please consult with your mortgage loan officer for more information.

Are you getting ready to refinance your home or are you getting ready to purchase a home?  There are a few things that you need to put on hold if you are considering doing either in the near future.  Remember the bank is looking for someone with a stable income and a good credit history.  One of the biggest mistakes people make is to purchase a new vehicle just before applying for a mortgage or even worse after they have already started the process.  Banks see this as a big red flag and it may cost you the financing for your home.  Hard as it may be, unless you are paying cash, wait until your refinancing is done or you have closed on your home before buying that vehicle.  A few other tips – don’t apply for new credit cards or credit line increases, don’t do anything that involves having your credit score checked.  These may seem obvious, but many people forget all about this and end up in a real mess trying to get their financing pushed through.  The whole process will only take a few months, so unless an emergency situation occurs, exercise patience and leave your banking and credit alone to get your home refinanced or your new home purchased.  Check with your loan officer for more details on what you can and cannot do.

According to Freddie Mac,mortgage interest rates have held pretty much steady for the past three weeks.  The 30 year fixed rate is holding at around 3.53% which is still less than the 3.87% a year ago.  The 15 year fixed rate remained at 2.77% compared to 3.16% last year.  The rates are still right around the record lows but are expected to rise this year.