According to recent reports, the mortgage loans will be harder and more expensive to get next year. Not it’s up to you to blame or thank Uncle Sam for that. You must be thinking why you would thank Uncle Sam for that; well because he’s trying his best to avoid yet another housing price crash or the big bank bailout in the near future. The US government might even hit the home borrowers with different issues in 2014 and therefore there are experts who are recommending people to refinance their mortgage loans right now so that they don’t have to be subject to outrageously high interest rates in 2014. The Federal Housing Finance Agency forced Fannie Mae and Freddie Mac to increase the fees that they charge to guarantee mortgages. These new fees would actually be passed down to the consumers beginning early in 2014.
The incoming head of the regulatory agency postponed the hike in the fees, as per the Wall Street Journal, Mel Watt and he said that he wants to evaluate and determine the rationale for the plan. If he approves it, the new borrowers will soon feel the pain. A homebuyer with 720-740 credit score who borrows a mortgage loan amount of about $20,000 and puts down 10% will face a whopping increase in the percentage of upfront fees. The change, that is combined with a smaller new fee can even add about 0.36% to the interest rate of the consumer who pays on that loan.

Why is Uncle Sam being such a mean-hearted person?

The perennial question among the consumers is why is Uncle Sam being such a meanie? It might be because Freddie Mac and Fannie Mae guarantee the majority of the mortgage loans and the government controlled agencies need a federal bailout 5 years ago. On the other hand, the government wouldn’t rather go through that again. By raising the cost of Freddie and Fannie backed loans, theprivate mortgage loan market is encouraged and developed. Getting a market going for all those smaller loans would ease the government away from the mortgage business.

Is this the right time to refinance your mortgage loan?

After record-low interest rates on your mortgage loans, the current rates are gradually rising out of control and hence this is the reason why the experts believe that it is the right time to refinance yourhome loan in order to avoid the high rates and fees in 2014. Here are some tips that you need to take into account before refinancing your home mortgage loan.

1. Improve your credit score: The first tip to take into account is to improve your credit score so that the lender doesn’t feel that you were not good at managing your finances in the past. The credit score is nothing but a 3 digit number that speaks a lot about your financial health and tells the lender whether you’ve been timely while making payments or you’ve been late at making payments.
2. Lower the DTI ratio: The ratio between your debt and income is yet another factor that you need to take into account. The higher is your DTI ratio, the higher will be the chances of obtaining a mortgage loan with a high interest rate. Pay off your debts and reduce your DTI ratio so that you can get a loan within your means.
3. Save enough money for the down payment: When you have to take out a mortgage loan, you have to pay down a certain amount of the loan amount (usually 20%) and if you don’t pay this amount, you might have to qualify for PMIs or the Private Mortgage Insurance payments. You should save enough money so that you can get a mortgage loan at an affordable rate.

Therefore, when you’re someone who is about to take out a new mortgage loan to repay the existing mortgage loan and is planning to wait until 2014, you should change this decision. Take into account the above mentioned statistics so that you can make a better informed and measured decision.