Home values in southwestern Montgomery County, Texas including The Woodlands have remained very stable, making mortgage refinancing far easier for residents than for their peers in other parts of the area, not to mention other parts of the country.
According to data from the Multiple Listing Service for the month of August, 2009, home prices increased marginally over the past year with the year to date median single family home sale price increasing from $211,000 to $215,000. While the number of sales has certainly decreased over the past year and the number of months of inventory has increased from 5.4 to 6.1, the stability of this area is evident.
Stable home values are critical in mortgage refinancing because the amount of money you can borrow is heavily dependent upon the market value of your home. For some borrowers who put little money down on the purchase of their house at the height of the housing market, the ability to refinance in today’s low rate environment is dependent upon a current market appraisal that shows stable prices. In addition, Texas state law limits “cash-out” refinancing to 80% of the homes current market value.
Furthermore, the loan-to-value percentage also influences the rate and terms you will receive on your mortgage loan. A borrower seeking to refinance a loan at 60% of the home’s current value will receive a better rate than someone who is refinancing at an 80% loan-to-value. There is less equity, so more perceived risk to the lender. The most attractive rates can be found below a 60% loan-to-value, and refinancing opportunities may be difficult to find much above 80%. This is partly a result of the dramatic changes that have occurred with private mortgage insurance. The ability to secure PMI, which protects lenders against default on loans with low homeowner equity, has become more expensive, and underwriting has become more stringent. Many lenders are wary to take on any refinance transaction where private mortgage insurance is required, even in a relatively healthy real estate market like The Woodlands.
Borrowers may have some relief even if they have little to no equity in their homes. Earlier this year, mortgage giants Fannie Mae (FNMA) and Freddie Mac (FHLMC) announced refinance programs designed to assist homeowners who have little to no equity refinance through the Freddie Mac Relief Refinance and Fannie Mae DU Refi Plus programs. In order to qualify, your loan must be owned by one of these mortgage agencies and additional criteria must be met. A local mortgage lender can let you know if you qualify for one of these programs.
Fortunately for many Woodlands residents, mortgage rates in Texas remain among the lowest in the nation. Houston metro area mortgage rates can often be found for .25% lower than in other parts of the country. In addition, certain parts of the country which have been identified as declining markets may be underwritten much more critically than the Houston area.
In the end, if your mortgage rate is much more than 1-2% above current rates, it makes sense to at least consider all of your refinancing options. Don’t let the negative press about home values and the credit crunch deter you from finding out whether a mortgage refinance can save you money.
Mike Lesmeister, CRMS, is a licensed mortgage broker and partner with Home Loan Specialists, Inc. a BBB-accredited mortgage lender specializing in low rate mortgage refinancing in the Woodlands, Spring, Tomball, Conroe, and Houston, Texas. For more information on the Woodlands and mortgage options, visit Woodlands Mortgage Texas
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