The Columbia SC mortgage lending market experienced something unusual in the past sixty days. The Federal Reserve raised the interest rate back in December 2015. Since that time, mortgage interest rates have dropped to their lowest level in three years! Most economists and mortgage lenders pointed out at the time that an increase in the Fed Funds rate wouldn’t necessarily translate to an increase in mortgage rates. However, few saw the resulting lowering of mortgage rates in their crystal balls.

Columbia SC Mortgage Rates: Time to Refinance?

Mortgage interest rates usually drop when volatility fueled by uncertainty in the stock market makes investors sell their higher-risk stocks in favor of buying safer bonds. When bond prices move higher as a result of the brisk buying, the yield on those bonds go down. A quick look at the stock market over the first 45-50 days of this year shows exactly what’s happened. Investments in U.S. Treasury bonds and mortgage bonds have been strong – for the time being.

In December 2015, fixed rates on 30-year conventional conforming loans were roughly 4%. Due to increasing bond trades, interest rates on this and other mortgage products have dropped as much as .5%. To better put that in perspective, a half-point interest rate reduction can significantly reduce monthly payments. It results in an $85 savings per month on a $300,000 Columbia SC mortgage, $170 per month on a $600,000 mortgage and a $900,000 mortgage payment will be reduced by $253.

As if these savings weren’t reason enough to consider refinancing, according to some analysts it’s possible that rates could fall even lower over the next several months. But there’s more to refinances than just interest rates. Other factors come into play like income and assets, property eligibility, and home equity. In the past, specifically in other post-housing crisis interest rate drops, some homeowners were unable to refinance. Many people were underwater with their mortgages – they owed more than their home was worth. In addition, other problems contributed to their inability to refinance such as income instability, slow credit and changing lending policies and guidelines.

In today’s Columbia SC mortgage environment, refinances are more prevalent. Home prices have either leveled off or are still increasing, unemployment has dropped and income growth is on the upswing. In addition, cheap oil prices have helped keep inflation low, and mortgage lending guidelines are more flexible than during any previous post-crisis rate reduction. All these reasons and more make it easier, more conducive and a smarter move to refinance than perhaps ever before.

Let’s take a look at the reasons home owners refinance. First and foremost, of course, is to lower their interest rate, which lowers the monthly mortgage payment. However, there are other reasons to take into consideration when you’re contemplating refinancing.

Reduction of loan payoff term.
Borrowers looking to reduce the length of time they have to pay on their mortgage should consider refinancing a 30-year loan to a 15-year loan. Naturally, a shorter term loan carries with it higher payments – though the interest rate is usually lower. With today’s even lower interest rates, it may be surprising at how affordable a 15-year loan term can be.

Cash accessibility.
As your home equity builds over time and as a result of higher home values, the nest egg your home represents can be substantial. A “cash out” refinance can give you access to your home’s equity to do with it as you wish. Many homeowners refinance their Columbia SC mortgages to make investments, purchase additional real estate, pay for college expenses for their children, or make home improvements.

Debt consolidation.
For qualified borrowers, non-housing related debt can be included into a home refinance. These debts could include auto loans, credit card debt, student loans and other consumer debt. Debt consolidation can help improve a credit score by showing that certain accounts have been paid in full. In addition, by rolling existing debt into a mortgage the borrower is able to deduct that additional interest, converting non-tax-deductible debt into tax-deductible debt.

Elimination of mortgage insurance or cancellation of a second mortgage.
Homeowners who purchased homes with a mortgage with less than a 20% down payment were probably required to carry mortgage insurance. Mortgage insurance protects the lender from the borrower defaulting on the mortgage loan payments. If the home’s value has appreciated enough to where the loan-to-value ratio (LTV) is 80% or less, a borrower can refinance the mortgage and eliminate the mortgage insurance requirement. For borrowers who have a second mortgage on their homes, refinancing is an excellent way to combine both the first and second mortgages into a new first mortgage.

Now that you know the reasons homeowners typically refinance, let’s examine the steps in the actual process itself.

Decide on a Columbia SC mortgage lender.
While your existing lender may be a good place to start, there are a variety of lenders offering similar interest rates and refinancing options. Choose the one that best fits your needs. Most rate quotes are based on a refinance being closed within 30-45 days. If you need to lock in your interest rate for a longer time period before you close, you can expect the rate to be slightly higher. Therefore, it’s important to get your lender the needed documentation and paperwork as soon as possible.

Assemble the documentation.
When it comes to documentation, a refinance is really no different than a purchase money mortgage. Federal lending regulations require that mortgage lenders have current employment and income verification, asset and liability statements and an updated credit report.

Appraise your home.
There are two parts to the refinance equation: one is the borrower, the other is the collateral on which the mortgage is made. Of course, the borrower must qualify, but the home has to, too. Your Columbia SC mortgage lender will require an appraisal to determine the value of your home. They then use that appraisal amount to decide whether the loan amount you’re seeking is within their guidelines concerning the LTV ratios for refinances.

Closing costs.
Refinancing is always an exercise in comparing the total payment savings against the costs of closing the loan. While closing costs vary according to loan size and lending market, they typically range from $2,500-$4,000. If you paid to refinance and rates dropped lower you’d risk losing money. Enter the no-cost refinance.

A no-cost refinance carries with it a rate that is slightly higher. If rates dropped, however, you wouldn’t be wasting money if you elected to refinance at the new lower rate. Discuss this option with your lender and see if it’s right for you.

Lock in your interest rate.
Work with a lender that will pre-approve you for the refinance. That way, you can be assured you’re being locked into a program and a timeline your lender can meet. Plus, once pre-approved, it’s easier to lock in a rate when they may fluctuate day to day.

Because rates change almost daily, if rates drop after you agree to your rate lock, most lenders have policies allowing you to renegotiate to the lower rate prior to closing.

We have a lot more Columbia SC mortgage information for you in our Columbia SC Mortgage Info section of articles to your right just below our Columbia SC Real Estate Categories. We also update the mortgage situation constantly on Twitter and Facebook. Check us out there as well.

Columbia SC homeowners are enjoying higher home values and are using their equity to take cash out of their properties by refinancing. Surprisingly, however, they are doing it conservatively –– more than any other time in recent history. A closer look reveals why that may be the case.

"Take Only What You Need" – Columbia SC Homeowners

In earlier times, such as the years leading up to the housing crash in 2008, homeowners regularly used their properties like ATM machines, taking as much cash out as their lenders would legally allow. With values inflated and equity almost non-existent, the amount they refinanced for was high compared to the home's worth. That and other actions led to millions of American homeowners being "upside down" or "underwater" on their mortgages. Ultimately more than 7 million homes ended up in foreclosure.

Since then, lending practices have been shored up dramatically to safeguard against the same thing happening again. In addition, today's borrowers are considerably more risk conscious – and are slower to add debt they don't need. Homeowners are still borrowing against their equity, with 42% of refinances in 2015 being for the purpose of taking cash out, not just refinancing to get a lower interest rate.

For most recent refinances, the average cash-out amount was slightly more than $60,000 and the average LTV ratio was 67%, the lowest level in history. The total amount of equity received through refinances in 2015 topped the $64 billion mark, the highest amount for any 12-month period since 2008-2009. Despite the record amount, homeowners showed remarkable fiscal restraint by not tapping into the remaining equity.

Economists say consumers are saving more now than they did during the years immediately after the housing crash. According to the Commerce Department, the savings rate in December 2015 climbed to the highest level in over three years. In addition, the borrowers refinancing to get cash enjoyed an average credit score of 748 – high for homeowners seeking refinances. This reinforces the position of mortgage lenders being risk-averse, but it's also a sign borrowers are taking only what they need. Simply put, they're leaving money on the table.

While Columbia SC homeowners still have most of their equity intact, they seem to be just fine with that. The memories of financial crises like the housing crash or even the Great Depression has had a lasting, memorable effect on a generation who vows not to go through it again. Plus, since interest rates on savings accounts have been so low, many baby boomers are staring at retirement wondering how they'll manage. Other workers of all ages have learned to look at their finances more cautiously. They've seen high unemployment, and they know the horrors of losing a home to foreclosure.

As a result, Columbia SC homeowners in today's economy take out only what they need when they refinance or get home equity loans. They begin paying it back almost immediately every month. For home equity loans, some banks require amortized payments, but not all do.

Borrowers typically are using their cash equity for home improvements, college tuition and rising health care costs. This is in stark contrast to the borrowers of just a decade ago, when home equity was used to purchase luxury items like boats, RVs, vacations and other extravagances.

We have a lot more mortgage related tips and information for you here.. just click on the Columbia SC Mortgage Info section of articles below Columbia SC Real Estate Categories to your right. We also post mortgage related information frequently on Facebook and Twitter. Be sure to find us there as well.

If you have a Columbia SC mortgage and didn't make at least a 20% down payment, you probably have private mortgage insurance (PMI.) PMI protects the lender if the borrower is unable to make the mortgage payments. Because PMI premiums are paid monthly in the mortgage payments, they can add up. So, how can you avoid PMI or drop it later?

Avoid Columbia SC Mortgage Insurance

The first way is easier said than done. To avoid PMI make sure you borrow 80% or less of the home's value. In other words, put 20% down when you purchase. Some people – even if they have the money – are hesitant to wipe out their savings or spend the money they were planning to use to make improvements to their new purchase.

Sometimes, your mortgage lender will pay the PMI for you. Lender-paid PMI involves the Columbia SC mortgage lender paying for the insurance in exchange for a slightly higher interest rate. The lender pays the PMI company directly, while the borrower "repays" the premium in higher monthly principal and interest payments. Many homeowners like that because they can deduct all the interest paid, while the PMI premiums are not deductible. One word of caution, however: while you can request the mortgage insurance requirement be dropped in time, the higher interest rate will remain until you sell the home, pay off the mortgage or refinance.

Lenders are required by the Homeowners Protection Act to remove PMI once the mortgage loan balance has dropped to 80% or less of the home's original sales price. That could take a while, but there's a way to remove it more quickly. By watching the marketplace you can get an idea of your home's value. As your home appreciates, the remaining loan amount you owe is a lower percentage of your home's new value. This ratio – called the loan-to-value ratio, or LTV – will over time be at or less than 80%. When that happens, request that your lender drop the PMI requirement.

For documentation, your lender may require an updated appraisal of your home and will require you to pay for it. But remember, only approach your lender when you're confident your home's value qualifies for the 80% or lower LTV. Consult a real estate agent or use the Internet to monitor comparable homes in your neighborhood. An appraisal will probably cost $300-$500, so make sure you qualify to remove the PMI before you contact your Columbia SC mortgage lender. Lastly, some lenders require the borrower to keep the PMI coverage for a minimum of two years. Check with your lender to find out what they require.

Sometimes, simply asking your lender to do away with PMI won't work. An FHA loan, for example, requires PMI for the entire loan term. In that case, you'll need to refinance – either with a non-PMI required FHA loan or a conventional loan. However, be smart. Refinancing just to get rid of the PMI insurance premium probably isn't a good idea since closing costs aren't cheap. It may cost more out of pocket than it's worth. Consider refinancing only if it makes good financial sense.

Get more mortgage tips and information in our Columbia SC Mortgage Info section of articles to your right just below Columbia SC Real Estate Categories. And check us out on Facebook and Twitter as well.

Columbia SC mortgage experts say 2016 may bring greater borrowing opportunities for homebuyers. Although you still have to qualify for the amount you want to borrow, more lenders are reporting a loosening of credit standards. Fannie Mae says loan underwriting is expected to ease in the near future. Let's examine why this may be the case and what the effect may be.

Columbia SC Mortgage Industry to Aid Housing

Relaxed credit requirements will likely help the housing market. Tight credit standards and a short supply of affordable homes for sale have been cited as reasons for the housing market's slow recovery. In a recent survey of Fannie Mae lenders, 16% said they expect a relaxation of credit standards in 2016. Lenders expecting a tightening of standards dropped to 2%. The survey was conducted by Fannie Mae and represented a cross-section of nearly 200 lending institutions.

While credit may improve, affordability for first-time home buyers will remain a challenge. With the number of starter homes on the market, home price appreciation is still higher than growth in household income. However, the easing of credit standards should provide some assistance to offset affordability.

As the prospect of rising interest rates looms in 2016, many lenders expect more competition. This may persuade them to ease some of the lending safeguards added after the last housing crash. Fannie Mae, Freddie Mac and the FHA have all worked to clarify lender liabilities for bad loans. They have been pushing hard for lenders to ease their credit practices to help the housing market recover.

In addition, Fannie Mae recently announced a new credit scoring program. Dubbed "trended data," the scoring model shows a broader review of the credit history of borrowers. That should improve the credit scores of some home purchasers. According to a recent study by TransUnion, trended data would increase the percentage of borrowers in the "super prime risk" tier from 12% to 21%. Those borrowers would get better access to new mortgage loans at the best rates.

Despite the potential relaxation in credit standards, a recent survey by the National Association of Realtors revealed roughly 66% of consumers perceive mortgages as "somewhat difficult" or "very difficult" to obtain in today's market.

Find more articles about the Columbia SC mortgage market in our Columbia SC Mortgage Info to your right just below Columbia SC Real Estate Categories.

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The Columbia SC home buying market may feel the effects of the Federal Reserve’s recent decision to raise interest rates… or not. The Fed increased the rate on federal funds for banks by .25%, the first such increase in over seven years. What does that mean for people contemplating purchasing a home?

Columbia SC Home Buying: What's Next?

As part of an overall strategy to allow the market to recover from the 2008 housing crash, the Federal Reserve purposely kept interest rates low.

For months new home buyers have anticipated a rate increase. That’s given many an incentive to buy or refinance existing mortgages before rates went up. However, a slight interest rate increase isn’t likely to deter buyers from continuing to shop for homes. If anything, it may continue to make them aware that interest rates could be on the rise and now is the time to buy.

The increase in the Federal Reserve rate won’t affect you all that much. There’s little correlation between the Fed’s interest rate and mortgage interest rates. Economists argue that rates on new mortgages have fluctuated throughout the entire year without any change in the Federal Reserve’s policy until recently. They cite, for example, a movement of 70 basis points (.70%) in the 30-year fixed rate mortgage loan category during 2015.

Higher rates don’t mean mortgage lending will tighten up. Because the Fed's rate hike was so small, it’s not likely to prevent homebuyers from being able to purchase. There are mortgage products available for most every financial situation — from low down payment requirements to still-attractive fixed rate 30-year conventional loans.

Higher rates may motivate you to act. Some economists expect interest rates to rise in 2016 by as much as 1%. While the increases will probably be small, they may serve as the “nudge” that some Columbia SC home buyers need to get off the fence and get serious about buying.

Higher interest rates may keep home values in line with wage increases. Home values increased dramatically in some markets during 2015. This appreciation rose higher and faster than wage increases, making it harder for many Americans to afford to buy. The rise in interest rates typically slows the rate of home appreciation. This will allow wages the opportunity to “catch up” with real estate appreciation, making homes more affordable.

If you have an adjustable-rate mortgage, you probably shouldn’t worry. You probably don’t have an ARM. Experts say 85-90% of mortgage originations in the past two years were for 30-year fixed rate loans. Homeowners that may have had an ARM likely refinanced during 2015 expecting a possible rate increase. If you have an ARM don’t worry. Most ARMs have a locked interest rate between 5-7 years. The rate will remain unaffected during that period. Even if you’ve passed that timeframe, chances are the rate increases in 2016 will be small. If you’re still worried about the future, a fixed-rate refinancing is always an option.

Continue to shop around for the best deal. Just as the Columbia SC home buying process involves looking for the home that best suits their needs, you should do the same when loan shopping. Find the loan program that fits you and your financial situation. Shop around. Ask questions. Compare rates and lenders.

Get more information on Columbia SC home buying by checking out our other articles in the Columbia SC Home Buying Tips section just beneath Columbia SC Real Estate Categories to your right.