When Dawn Williams closes Friday on the deal to refinance her home, she’ll be saving more than $100 a month on her mortgage.
Williams, who bought a home in Englewood on Oct. 1, 2008, is taking advantage of a combination of low interest rates and the Federal Housing Administration’s Streamline loan program.
“I was pretty much scared because the process of buying a home was so overwhelming for me,” she said. “But it really was easy. It took maybe an hour out of my day.”
With average rates on 30-year fixed mortgage loans falling below 5 percent for the first time since May, many Denver loan originators are seeing an increase in calls from customers wanting to refinance their mortgages.
Refinance applications climbed 18 percent nationally from the previous week, the Mortgage Bankers Association reported Wednesday, as the average rate on 30-year home loans dropped to 4.89 percent.
“The government recommitted to buying mortgage-backed securities, and it’s helping,” said Liana Pomeroy, a certified mortgage-planning specialist with Cherry Creek Mortgage Co. “When rates go down, people get into action. If you can save $100 a month on your mortgage and not pay a lot to do it, why not do that? It’s an easy way to help with monthly expenses.”
The Federal Reserve started buying mortgage-backed securities in January to drive down mortgage rates. But it plans to slow its purchases of mortgage-related debt and extend the program through the first three months of 2010, which will probably push rates higher.
Rule changes also are coming to the FHA Streamline program starting Nov. 18, which will make it more difficult to qualify for refinancing, said Mike Oswald, a mortgage broker with American Home Funding, who helped Williams with her refinancing.
The changes on the FHA Streamline loan will require at least six months of payments before a borrower can take advantage of the program, and verification of assets, employment and income. Also, more borrowers will need to come up with more cash to refinance because of new rules to calculate the maximum loan amount relative to the home’s value.
“That’ll stop up to 85 percent of my Streamline borrowers,” said Pava Leyrer, president of Heritage National Mortgage in Michigan.
Mortgage brokers say a refinancing is worthwhile if you can shave off at least $100 from your monthly payment or get a full percentage-point rate reduction.
That’s why rates below 5 percent are so appealing. It’s only the second time this year they have dipped that low. Rates hit a record low of 4.78 percent in the spring.
The Associated Press contributed to this report.
Margaret Jackson: 303-954-1473
