Today's Mortgage Rates

Thinking of refinancing into a 15-year mortgage? Or maybe you are planning to buy a home and want to finance it with a 15-year home loan instead of being tied into a 30-year mortgage. Consider the pros and cons of 15-year mortgage loans.

Current Mortgage Rates Are Low 

Anytime you finance with a 15-year mortgage you are going to get a lower rate than with a 30-year loan. Rates on 15-year fixed mortgages are at 4.21% and 30-year home loans are averaging 4.78%. Mortgage rates on both types of loans are exceptional right now by historical standards, but you’ll need to do the math to decide if a 15-year term makes more sense for your situation.

Monthly Payments Are Larger

Obviously you will end up paying less interest over 15 years as opposed to 30 years. But keep in mind that a 15-year loan is going to require a larger monthly payment than a 30-year mortgage. If you have any doubt about being able to make the larger monthly payments, you’re probably better off going with a 30-year term. You can always make extra principal payments to pay off a mortgage loan faster.

It’s hard to say how long these low mortgage rates will last. If you believe that refinancing into a 15-year mortgage can help your financial situation, now is the time to act.

Housing starts and home sales got a nice bump in March and April as the $8,000 tax credit for first-time buyers came to a close. The landmark program, along with its $6,500 companion credit for existing homeowners, has helped prop up the flailing housing market and inject some confidence into the greater economic landscape.

There have been rumblings that the successful-but-costly program might get a third extension. But that’s increasingly unlikely. Representatives of both the National Association of Realtors and the National Association of Home Builders told the Wall Street Journal recently that a push to re-extend the program isn’t on the table.

As real estate agents and home builders prepare for a return to normal, it’s important to remember there’s still one last surge waiting in the wings: Military buyers.

Military members serving our country on extended duty in places like Afghanistan, Iraq and elsewhere have a bit more time to take advantage of the tax credits — an entire year, to be exact. Service members who meet the eligibility requirements for the exemption have until April 30, 2011, to enter into a sales contract on a home and until June 30, 2011, to close on the property.

Like all other borrowers, military members have to adhere to the program’s conditions and requirements , which include:

·         First-timer buyers (and their spouses) cannot have owned a home in the previous three years.

·         Individuals can’t make more than $125,000 per year; married couples cannot have an annual income greater than $225,000.

·         The cost of the home cannot exceed $800,000.

Veterans who are existing homebuyers might be able to qualify for the $6,500 tax credit, provided they have lived in the same home for five of the last eight years. Otherwise, the requirements and conditions are the same as for the $8,000 tax credit.

As important as these tax credits have been for everyday buyers, they might actually be even more significant for military borrowers. Eligible veterans and active duty service members can combine the tax credits with the no- and low-cost benefits of VA loans  to save a substantial amount of money on a home purchase.

About the writer: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, including Bigger Pockets, Mortgages Unzipped and Lenderama.

In many parts of the country, a significant number of homeowners currently owe more on their mortgage than their home is worth.  The result this negative equity problem is that many people are going into foreclosure or short selling their home — or even doing something called a strategic default, where they can afford the payment but choose to leave the home.

And at least one popular theory has the Obama administration pushing for more principal reductions (reducing the amount owed on the mortgage) as a tool to help stem the tide of foreclosures.

Pressure is mounting on loan servicers and investors to reduce troubled homeowners’ loan balances…but the two largest owners of mortgages aren’t getting the message.

Fannie Mae and Freddie Mac, which are controlled by the federal government, do not lower the principal on the loans they back, instead opting for interest rate reductions and term extensions when modifying loans.

But their stance is out of synch with the Obama administration, which is seeking to expand the use of principal writedowns. In late March, it announced servicers will be required to consider lowering balances in loan modifications.

The problem here is that nothing is official and no one seems to want to comment on whether or not Fannie Mae or Freddie Mac will start doing principal reductions for troubled homeowners.

Why would Fannie Mae and Freddie Mac be hesitant to do principal reductions?

What’s holding them back is the companies’ mandate to conserve their assets and limit their need for taxpayer-funded cash infusions, experts said. If Fannie and Freddie lower homeowners’ loan balances, they are locking in losses because they have to write down the value of those mortgages. Essentially, that means using tax dollars to pay people’s mortgages.

I don’t know whether or not principal reductions will become a new tool — but with the Obama administration pushing for it, I suspect that something like this is coming soon.

And no, that doesn’t mean that I am officially commenting on it… just guessing.