With record-low interest rates potential home buyers are seeking
to buy and current homeowners are seeking to refinance. But low appraisals are making it difficult or
even impossible for some borrowers to take advantage of this boon in record-low
The problem stems from the fact that home prices have plummeted
even further than first anticipated, as wells as laws and rules enacted by
legislators and lenders in the wake of the financial crisis which seek to eliminate
inflated appraisal valuations and improper pressures on appraisers as seen in the
housing boom have now resulted in an “over-correction” or unnecessarily
Also, accurate valuation for appraisals may be hard to come
by when sales in the real estate market have been so anemic.
There are steps, however, that you can take for a
purchase or refinance transaction in order to increase the odds that your mortgage is approved and
your deal gets done.
Some of these steps include the following:
• Know what the range of value is for your area by looking at comparable
sales from the last three to six months;
• Accompany the appraiser during the inspection, pointing out features
and improvements that add to the home's value;
• Although chances are slim, request that the lender review the appraisal findings, especially if you think the appraisal
is unusually low, contains factual errors, such as the number of bathrooms and so forth, or you have more recent
comparable sales that were not available at the time the appraisal was initially done and submitted; and
• Start over with a new lender if your original financing falls through.
Shortening Loan Terms
The New York Times
By VICKIE ELMER
Published: June 1, 2012
LOW interest rates are making it easier for homeowners to reduce their mortgage payoff times considerably.
a third of those who refinanced in the first quarter cut the duration
of their mortgages to 15 or 20 years from 30, according to a recent refinancing report by Freddie Mac. The 31 percent
who shortened their terms represented the second-highest level since
2002, when 35 percent took out shorter-term
loans, the data showed. In the
fourth quarter of 2011, 34 percent had reduced their mortgage terms.
The all-time high occurred in 1992, with 42 percent refinancing into
low rates and an average three-quarters of a percentage point
difference between 30- and 15-year mortgage fixed-rate mortgages are
for moving to a shorter term,” Frank Nothaft, Freddie Mac’s chief
economist, said in an e-mail.
The 15-year fixed-rate loan averaged 2.97 percent nationwide, according to Freddie Mac’s latest
survey, released on Thursday.
That was the lowest rate since the agency started keeping track of that
loan in 1991. The 30-year loan also set another record low, at an
average 3.75 percent. The
switch to shorter loan terms may also be part of a trend to deleverage
and reduce debt levels, which started in the economic downturn. “People
control of their own equity — they’re paying it down quickly,” said
Michael McHugh, the president of Continental Home Loan and president of
Empire State Mortgage Bankers Association.
people decide to refinance into a shorter mortgage after they have been
promoted at work, said Kate McCue, an executive vice president of McCue
a direct lender in New Britain, Conn. She suggests that borrowers look
at their own financial situations, including how long they expect to
live in their homes, before deciding on a shorter refinancing.
loan terms often mean higher monthly payments. But this may be offset
in part by the capturing of very low rates. In the first quarter,
30-year mortgages lowered their rates by a median 1.5 percentage
points, or a savings of about 27 percent of their rate, the largest
reduction recorded in Freddie Mac’s 27 years of analyses.
shorter term may have some tax advantages as well. You restart the
mortgage amortization and pay more in interest initially, Mr. McHugh
said; this results
in a good tax deduction for a few years.
loan terms of, say, 10 or 15 years also allow borrowers to build equity
much more quickly, even when home prices are not appreciating, Mr.
can achieve similar results by paying down the balance when they
refinance, by adding in extra cash — 21 percent of borrowers did so in
Freddie Mac found.
their finances or jobs are tenuous, some homeowners may be more
comfortable refinancing into 30-year mortgages, then making bigger
payments as often as they
can, Ms. McCue said. If they suffer a financial setback, she said, they
will then have the flexibility of falling back to the standard monthly
you’re not sure which term works best for you, begin your research by
picking a good mortgage calculator online and crunching the numbers for
terms, Ms. McCue said.
who decide not to refinance can still pay off their mortgages faster by
sending in an extra month’s payment once a year, said Chanda Gaither, a
counselor at La Casa de Don Pedro, which works on affordable housing
and neighborhood development in Newark. She has seen families save up a
small amount of money every month and then annually apply it to the
principal. “Or take it out of your tax return”
when the refund comes in, she said.
If you made an extra month’s payment each year, your 30-year mortgage could be paid off in about 23 years, Mr. McHugh said.