Q & A: Refinancing, Interest Rates and More

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Q: My husband and I are in the process of trying to refinance. We understand our home needs to appraise at a certain price to qualify. What if our home comes in under that value? Can we definitely not refinance?

A: You can, but there are a couple of scenarios that present themselves if this happens, you can either: 1) pay out of pocket to get the mortgage amount to 80 percent of the appraised value, 2) a lower value may still allow you to continue with the refinance but you may be subject to Private Mortgage Insurance, which is an extra cost that comes into play when someone is financing over 80 percent, and 3) you MIGHT be eligible for one of the government refinance programs that could allow you to change your program to complete the refinance.  This would allow you to close without mortgage insurance if you do not currently have it.

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Q: Are interest rates going up? My husband and I are in the market for a house, and we are unsure if we should move more quickly because the more they rise the less money we can spend on a purchase price.

A: Interest rates are no longer at the lowest we've seen since the government started supporting the market to lower interest rates.  So the short answer is, they already have gone up.  That said, interest rates are based on a bond market, much like the stock market, which has the ability to change daily.  The thing about the bond market is that it is what's called a "safe haven" trade, meaning money goes into the market when there's bad economic news. That pushes rates down.  As I'm sure you've seen, we seem to be turning the corner on this as the stock market is at record highs and economic news is getting better.  That all means that rates will most likely be going up.  The question is just how quickly. 

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Q: How do I know how much house I can afford? How can I figure out the money I need at closing and my monthly payments?

A: You need to engage a mortgage professional to help you figure this out.  However, it is important you find one you are comfortable with to the point you are giving some sensitive information.  A good mortgage professional will walk you through a pre-approval, which will give you a very good idea of how much you can afford and/or what you should be looking at based on the maximum amount you would like to pay.  In conjunction with that, he/she will also give you a good idea of how much money you will need to close.

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Q: Are there different loan programs at different banks? We called around for a mortgage and each bank gives us a different loan offer with different terms. How is that possible?

A: There's no one bank that can do every loan under the sun.  Also, the days of brokers who deal with 50 to 60 banks is basically gone as well.  Therefore, there are different loan programs at different banks.  There aren't a ton of loan programs that exist anymore, but each bank may have a little niche they can serve.  As for rates and terms, those are actually set by the bank itself.  There is a marketplace that dictates where pricing is trending, but every bank prices its loans based on the market and other internal factors.  That means there will be different rates at different banks.  There shouldn't be a huge difference, but that's why it is important to shop around.

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Dottie Herman is CEO of Douglas Elliman. If you have a real estate question for Dottie, please send it to Reporters@WPCnews.com