Archive for home refinancing
Cash Out Refinance vs Home Equity Loans
Posted by: | CommentsOne of the best benefits of being a homeowner is getting the opportunity to get cash out. Borrowers can choose from a home equity loan or a cash out refinance loan. The home equity loan is a second mortgage lien and the cash out refinance is redoing your first mortgage. If a homeowner already has a low fixed rate mortgage at 5% or lower than an equity loan can be appealing because it allows you to get a cash out second mortgage without touching the mortgage you already have. If a borrower has an interest rate above 5% and/or it’s not a fixed rate mortgage, then cash out refinancing is an ideal opportunity for borrowers to reduce their interest rate while getting access to cash.
The fees and closing costs on refinance loans are typically higher than home equity loans, but in today’s competitive market you may be able to qualify for a no cost mortgage refinance, so discuss your options with your lender prior to jumping to conclusions. Another appealing option is the home equity line of credit. Like the home equity loan, it is a second mortgage, but with an equity line you only pay interest on the portion you access. So if you are doing a remodeling project that may take a year or two then, the home equity line might be the best solution. If you are taking out cash to consolidate debt then, a fixed rate home equity loan would make sense over a credit line, because the interest rate is fixed and the terms are set.
When looking at cash out loan guidelines for home equity and refinance loans, the following applies: FHA refinancing allows first mortgage refinancing with cash out options up to 85% loan to value. Conventional refinance loans enable borrowers to finance up 80% loan to value and VA refinancing enable veterans to get cash out up to 90%. Home equity lenders offer cash out loans and lines from 75 – 90% loan to value, but the credit scores must be excellent to qualify. The other factor to remember is that since equity loans are second mortgages, you have to calculate your present loan plus the second loan amount, divided by the appraised value to calculate your combine loan to value.
Will Mortgage Refinance Rates Improve?
Posted by: | CommentsLetter to the Lender: We were recently shopping for a home refinance loan online and we received a handful of mortgage quotes. Obviously we want the lowest mortgage refinance rates possible. We also want a fixed interest rate on a 30-year term and if we can qualify for a no cost refinance mortgage that would be another benefit. One of the lenders offered us a FHA refinance at 5% fixed on a 30-year term with no points and no fees. Another lender offered us a FHA loan at 4.875% on a 30-year term with no points, but there is $3,000 in closing cost that we would either have to pay out of pocket or we could roll into the loan. Which option do you think we should go with? Is no cost mortgage refinancing always the best choice when shopping for a mortgage loan? Do you think we should wait for refinance rates to drop more?
First of all, if you have the opportunity to save money with a fixed rate while interest rates are at all-time lows, you should jump for the opportunity and move forward. Although mortgage interest rates are extremely low today, it is very difficult to qualify for mortgage refinancing, because lenders have tightened guidelines significantly in an effort to minimize loan defaults and foreclosures. Just because you qualify today does not always mean that you will qualify to refinance tomorrow. For example, What if you are approved for a FHA mortgage at 96% loan-to-value now and FHA changes the guidelines to 95%? What if there were several foreclosures on your street that brings your value down so that your loan to value balloons to over 100%? These are both real reason why borrowers don’t qualify for a refinance loan that they once were approved for.
To answer your second question, I must understand your big picture first.
1. Do you plan on selling your home or moving any time soon? No, we would like to retire in this home.
2. What is the balance on your first mortgage? $385,000
3. What is your home’s appraised value? $495,000
4. Do you have a second mortgage and if so did you want to refinance the second mortgage with the new loan? No second mortgage
5. Have the lenders ran your credit and sent you loan disclosures with a Good Faith Estimate? Yes, we have 739 middle fico score and believe it or not we received loan disclosures from both loan companies.
Lender Recommendation: First of all I would recommend rather than going straight for a FHA loan that you get a quote for a conventional mortgage backed by Fannie Mae or Freddie Mac. FHA loans are great but you are below 78% LTV and you qualify for a prime rate loan with no mortgage insurance. Unless you get a 15-year loan, FHA guidelines requires that you pay a mortgage insurance premium when you close the loan, in addition to a monthly insurance charge. In your case that would save you over $100 a month by choosing a loan backed by Fannie or Freddie. Regarding which refinance option to choose — While the no cost mortgage refinance is appealing but if you keep this loan for the life of the term you would save money by paying the $3,000 in closing cost and go with the lower rate option. These are great refinance options and you could not go wrong with either mortgage loan. Mortgage refinance rates are at record lows so the chances of interest rates improving are slim. It certainly is not worth the risk of refinance rates rising, because there will be a time when they go up and do not come down…
Is Mortgage Refinancing the Best Way to Consolidate Debt?
Posted by: | CommentsHomeowners seem to have the ability to accumulate more debt than non-homeowners. Maybe it’s because typically their housing expenses are greater than non-homeowners or maybe it’s because homeowners have been leveraging the debt with tax deductible mortgage refinancing for the last few decades. Credit card debt is the most common debt that homeowner look to refinance by they also like to refinance home equity credit lines, automobile loans and existing second mortgage loans. If the borrower has the ability to make their mortgage payments on time, then we recommend refinancing a large amount of debt if doing so doesn’t increase the interest rate of your first mortgage. If your job or income is unstable then we would likely not advise you to use your home as collateral for a loan you may not be able to pay back.
Second mortgage refinancing would be less of risk in this case, because 2nd mortgage lenders can rarely foreclose on a home if the borrower is current with their first mortgage. Home equity loans can also be used as a debt consolidation loan. All of these types of loans are considered cash out refinance loans and this form of financing is used as a vehicle for homeowners to consolidate debt and lower their monthly payments.
Before utilizing the cash out refinancing features, homeowner should consider the pros and cons of leveraging their debt with a secure mortgage loan that uses their homes equity to pay off debt. Debt consolidation refinancing can offer many benefits, but you should evaluate your financial goals before committing to another mortgage.
Mortgage Refinance Tips to Maximize Low Rates
Posted by: | CommentsMortgage refinance guidelines tightened this year, so many homeowners are being rejected by their lender for refinancing. Just when you think that you have seen the lowest mortgage rates ever, the interest rates get even lower. Most mortgage executives have indicated they believe the low rates won’t last and that mortgage rates will begin to rise again in 2011. With that being said, it is important to qualify for a mortgage refinance loan, now while the rates for home refinancing are so favorable. Nationwide loan officers provide mortgage refinancing tips at no cost.
Looking for an Affordable Home Refinancing Solution Online?
We outlined the top 3 mortgage refinancing benefits:
1. When refinancing, your new loan should have a mortgage refinance rate at least .5 percentage points less than your present interest rate.
Years ago most financial advisors had recommended mortgage refinancing if you could get a mortgage rate at least 1 percentage point less than your current mortgage. Well, the rules have changed, because refinance rates in recent years have been at historical lows, so a half point drop makes up a larger percentage of your existing rate.
2. Typically most people refinance into the same type of home loan they started, simply because they do not know any better. That can be a financial blunder that could cost the borrower thousands of dollars a year. If you are a few years into a thirty-year mortgage, don’t just refinance into a new mortgage because you save a little bit of money with a reduced mortgage interest rate. The new mortgage could be stretching out your payments over several more years, so you might not really be saving money. For example, let’s say you only have twenty years left on your existing home mortgage. If you can refinance into a thirty-year home loan you would be adding ten years to your existing mortgage loan. If you have the option to qualify for a no cost loans we recommend that you seize the opportunity.
3. Closing costs and lender fees should be recovered within the first 3-5 years or less. Closing costs factors should be considered before signing the paperwork need to close a loan. You’ve got to make sure the proposed mortgage rate makes sense on paper financially. Don’t assume that the closing costs are justified. Many home refinance loans will see closing costs in the $5,000 to $10,000 range and some have even higher lender fees.
MGIC Adjusting to Compete with FHA Loans
Posted by: | CommentsFixed rate refinancing remains in high demand for homeowners who have an adjustable rate mortgage, but have not been able to qualify to refinance because their home is worth less than the their mortgage balance. Reuters reported last week that MGIC Investment Corp who is the largest home mortgage insurer in the United States, reduced its premium rates in an effort to recapture market share lost to FHA loans insured by the Federal Housing Administration. FHA mortgage rates have remained competitive with conventional interest rates since 2007.
The low mortgages rates have been available to consumers with high credit scores. Higher interest rates will be offered to borrowers with lower credit scores under the new pricing system. According to mortgage advisor, Sandy Sarconi, “MGIC may be too late reacting to FHA because they have taken 30% of the market-share.”
Presently, FHA loan guidelines do not consider credit scores when pricing its insurance for FHA mortgage loans. The new prices will be effective May 1, the company said. In January, MGIC reported its tenth straight quarterly loss because of increasing delinquencies. More and more homeowners are failing to make their mortgage loan payment on time. The company did make a statement that they anticipate home loan delinquencies to reduce towards the end of 2010.
FHA Mortgage Refinancing with No Equity
Posted by: | CommentsFHA offers loan programs for borrowers who need a FHA refinance loan but have no equity available because of the sluggish housing market. The FHA streamline refinance is great for the homeowner that has a wants a rate and term refinance. No cash out or debt consolidation is available with FHA streamline loans and certain restrictions do apply. To qualify for a FHA streamline, you must currently have a FHA mortgage that you are current on with no late payments in the last year. In late 2009, HUD made some changes to the FHA guidelines and a good payment history on your existing FHA loan is essential.
Let’s face it millions of homeowners owe more than their home is worth. Fannie Mae and Freddie Mac offer the Home Affordable Refinance Program and the DU Refinance Plus program that FHA allows you to refinance your mortgage without an appraisal (so the fact that your house’s value has dropped like a piano from the roof is irrelevant) if you meet certain guidelines.
The FHA streamline refinance has been surging in popularity with FHA lenders because it meets the needs of so many homeowners that are blessed with an FHA loan. FHA mortgage rates are as low as they have ever been and FHA loan companies have become much more efficient processing government refinance loans.
FHA Streamline Refinance Requirements
1. You have to have made at least six payments on your current FHA loan.
2. If you have had your FHA loan for less than 12 months, all the loan payments must have been made in a timely manner. If you have had the FHA mortgage for more than 12 months, you can have been late only once in the last year and must have paid on time the last 3 months.
3. Your new FHA loan payment must be at least 5% lower than your old payment, or you must be replacing an ARM with a fixed loan (the new FHA rate can’t be more than 2% higher) or hybrid loan (the new loan payment can’t be more than 20% higher), or reducing the term of your FHA loan, or reducing your interest rate by at least 2% (if replacing a fixed home loan with an ARM).
4. The property being refinanced must be your primary residence.
5. Closing costs for FHA streamline loans must be paid upfront (with the exception of mortgage insurance premium (MIP), which can be financed in the new loan.
Which Mortgage Refinance Loan is the Best for You?
Posted by: | CommentsThere are many important determining factors in choosing the best refinance loan for you and your family. The first question you need to ask yourself is which refinance programs do you qualify for. The second question to consider…What is the purpose for refinancing the home loan? What are the various options for refinance loan programs?
| • | Rate and Term Refinancing for Lower Payments |
| • | Cash Out Refinancing for Debt Consolidation |
| • | Save Money by Refinancing Home Equity Credit Lines |
| • | FHA 203k Loans to Finance Cash for Home Remodeling |
| • | 30-Year Fixed Rate Home Loans |
| • | 100% VA Mortgage Refinance |
| • | FHA Streamline Loans for FHA Borrowers |
| • | Combine 1st & 2nd Mortgage Loans for 1 Lower Payment |
Our mortgage refinance team offers a free consultation that usually reveals the best solution based your financial needs, goals and lending qualifications. Our experienced loan professionals can help you understand the details and differences between conventional and FHA mortgage loans. If you are considering a cash out or FHA streamline refinance, we will help you review the FHA requirements for mortgage refinancing.