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Refinance Tips
Fannie Mae Partners Offer Automated Underwriting
Some lenders offer automated underwriting for home refinancing. Refinance loans may be approved in minutes.
Most lending partners of Fannie Mae, a private company established by the federal government, use what is known as Desktop Underwriter® (DU). With Desktop Underwriters, it may not be necessary to have your property appraised, which will save you time and money.
By visiting the Fannie Mae web site, you can get a complete listing of its lending partners and the loan products offered. Fannie Mae is not a direct lender, instead working with approved lenders across the U.S.
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How to Decide to Refinance Your Home
To refinance or not to refinance? Don't answer that question yet. You need to figure out a few things first, namely what kind of money will you save refinancing your home.
* How long do you plan to own your home? It makes a difference, because the costs to refinance may be more than your savings from lower interest rates, if you don't plan to stay long.
* How many years will it take to pay off your current mortgage? If you are near the end of your loan, it may not be worth it to refinance.
* Will I go into debt with the refinancing costs?
Take a hard look at the costs and savings before choosing a refinance loan.
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The Best Refinance Mortgage Options
Today, looking for a refinance mortgage is as easy as turning on the television, listening to the radio, or going to any major website. There are advertisements in every medium telling you about the low interest rates that are available these days. Well, they are all telling you the truth. If you are interested in the best refinance mortgage options for you, here are a few pointers.
First, ask yourself what matters most. Is it more important for you to have a lower payment or a shorter term? Would you like to perhaps take some cash out equity from your home's appreciated value? These are just two of the questions that will help decide the best options for your situation. Ask these questions of yourself, and then to a qualified mortgage broker or originator. You can take these needs that you decide on and then shop around for the best refinance mortgage options for you.
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3 Reasons to Refinance Before it is Too Late
There are many reasons that people today are choosing to refinance their home loans. Many of these reasons are specific to the person's situation; however, there are some general reasons why people across the country are rushing to refinance their mortgages. Here are three of the most popular reasons, and there is nothing to suggest that they will all last forever. Financial trends change, so pay attention to these three factors and refinance before it is too late.
Low Rates – Home loan interest rates hit 40 year lows a year or two ago. Although they have gone back up slightly, they are still lower than we have seen in a few generations. These low rates would be enough excuse for anyone, but there are many more such as….
Home Values – With home values skyrocketing across the country, people are looking to take advantage of their home equity by drawing some out through a refinance. Many lenders will loan up to 100% of your home's value allowing you to take cash out above what you owe on your principle.
Options – Banks have become very creative with home loan programs. For refinance options, you can even get loans today that give you multiple payment options, depending on what you feel like spending in a given month. With all of these options, it is easy for a person to find one that fits their ‘needs'.
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Refinance Loan May Stabilize Your Interest Rate
A refinance loan helps you lower your monthly payments and get better interest rates. A refinance mortgage also may provide some peace of mind.
Let's say you went with an adjustable-rate mortgage (ARM) when you took out your loan. But the rates have increased. Refinancing is an option, so you can switch to a fixed-rate loan. You will not have to worry anymore that your interest rates will rise.
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Home Improvements? Cash Out Refinancing!
If you are lucky enough to be a home owner who has built up home equity over the last several years, you have opportunities you may not be aware of. Have you been looking to expand that bathroom or put on a new roof? The equity that you have built up in your home is where you can go to quickly get the cash you would need to get those jobs done.
The best part is you are simply re-investing the money back into the property anyways! Refinancing a home loan to draw out cash equity for home improvements is something that many banks are lining up to provide. Because you are re-investing in the home, it makes the loan even more attractive to the banks. Be sure to tell the broker that you are working with that you are looking for a “cash out” refinance for home improvement.
Refinancing is about security, for you and for the banks. They feel much more secure in a borrower who shows they care for keeping their property in good standing. Look into refinancing your home mortgage if you need some cash for home improvements.
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Refinancing Home Mortgages to Extend Your Term
The math involved with home mortgages is easy to understand if you look at it in the right perspective. You start off borrowing a certain amount of money for a certain amount of years and agree to pay it off little by little. Let's say you are 15 years into a 30 year mortgage and interest rates have gone down, as they are now. You have spent 15 years reducing your principle balance on your loan, which means that if you choose to refinance, you will be paying the same amount of money off, but buying yourself an extra 15 years to pay it down… and at a lower rate, too.
Refinancing home mortgages to extend the term is a common way that people can reduce their monthly housing expenditure. It is also great for people with built up equity that wish to draw some of that out. If this interests you, talk to a mortgage broker about a ‘rate & term' option for refinancing home mortgages such as yours. You will have no problem getting their attention if you fit the description above.
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Lower Monthly Payments May Cost You in the Long Run
Is a refinance loan right for you? Lower monthly payments are attractive. But they come at a price. Weigh your options before you make a decision.
* You may be able to lower your interest rate, but refinancing may increase your principal amount.
* Whether it's a good idea to refinance may depend on how long you plan to own our home.
If you plan to stay in your home for a while, refinancing may make sense, because of the cost savings of lower interest over several years. If you plan to sell your home soon, the cost to refinance may be prohibitive.
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Build Equity in Your Home More Quickly
If you can afford higher monthly payments, you may want a refinance mortgage to build equity in your home quickly.
You can do this by refinancing for a mortgage with a shorter term. You may refinance a standard 30-year mortgage for a 15-year mortgage, for example. You still will pay toward your interest on the loan, with the rest going to the principal. But with the shorter loan term, you will have a higher payment. A larger portion of the monthly payment goes to the loan amount.
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Second Home Financing Trends Recently Reported
Nearly one-half of all U.S. Home Sales in 2005 were second homes. Second home sales captured forty percent of the residential resale market which makes a strong statement about the real estate industry and consumer investment strategies.
Interestingly, the average borrower's income is $60,800 for primary residence buyers with median loans of $136,000. Second home purchasers have a median income of $101,900 and loan medians of $118,000.
Lenders classify second homes as a dwelling that the purchaser will not occupy as a primary residence. Second homes are classified as vacation or investment. During the years 2000-2004, loans for second homes grew from 8.6% to 14.2%. The number of loans for second homes doubled.
States enjoying the largest volume of second home purchases are Hawaii, Florida, Arizona, Nevada and Idaho.
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You May Want to Lock in Your Interest Rate
The interest rate on your refinancing home loan sometimes can float, or vary, before closing. The best way to curb this, and end any sticker shock, is to ask your mortgage company for a written statement guaranteeing the interest rate and number of points. This is called a lock-in.
A lock-in rate provides assurance that your lender will not increase costs even if the rate goes up before your closing. You also can ask your lender to allow for an interest rate drop before closing, but to guarantee it will not raise the rate on your loan.
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Mortgage Refinancing
Typically, it is not difficult to find a lender to combine the two mortgages unless the combined total exceeds your property's value. During the past decade, second-mortgage lenders have been lending up to 125% of a property's value. For those borrowers it is often necessary to "bring money to the table" (add cash to reduce the balance) when they refinance or sell.
If you do not owe more than the property's value it can be helpful to contact a mortgage broker who has access to many different programs. Mortgage brokers are able to work around blemished credit and lower credit scores easier than a conventional bank. Be certain to verify that you are not over-paying with added fees or interest rate to make up for credit issues. If the cost is too high it is often better to sell your home and repurchase a home that provides comfortable payments.
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Refinancing a Land Contract
Obtaining a mortgage to refinance a land contract is not very different than securing a mortgage for a regular home purchase. Follow the tips below:
• Rate shop – Rate shopping includes the process of comparing closing costs and mortgage fees. Lenders are required to provide you with a Truth-in-Lending Disclosure Form that will itemize all the fees related to the loan. It will also indicate the mortgage's "effective interest" rate. The "effective rate" includes all costs attributed to the loan.
• If a lender offers you a program that "seems too good to be true" it probably is. The government and current borrowing costs regulate lenders and their mortgage packages must fall within certain perimeters. Any lender who can cut your interest rate by more than a half- percent of another will be making up the difference in charges or fees.
• Determine if you will do best with a fixed rate loan or an adjustable rate mortgage. Interest-only programs are gaining popularity as a vehicle to increase buying power, but are riskier. Use a fixed rate program during times of lower rates and an adjustable when they are higher (eight and a half percent or higher). Only use adjustable loans that have a cap to prohibit limitless increases.
• For the land contract conversion, arrange financing up to 45-60 days prior to the deadline to be safe.
• Eliminate or reduce any revolving debt or other expenses that are not necessary. The less you owe, the stronger a borrower you will be.
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When is the Best Time to Refinance?
Refinancing is paying off your existing mortgage and taking out a new one.
Why should you refinance? Here are some reasons:
* Obtain a lower mortgage interest rate and lower your monthly payment.
* Build equity faster.
* Change your loan.
* If you have improved your credit history and rating, you may want to refinance. It should lower your costs.
