There aren’t as many refinance loan programs as there are applicants, but at times it feels like it! We can help you choose the refinance program that will fit your needs the best. Contact us at 800-707-3683 to get started. surveying your options, you can think about what you want to achieve with your refinance.
Reducing Your Monthly Payments
Are achieving reduced mortgage payments and a better rate your main refinance goals? Then a low, fixed rate loan may be your best option. Perhaps you now hold a fixed-rate mortgage with a higher rate, or perhaps you hold an ARM — adjustable rate mortgage — with which the rate of interest varies. Even as interest rates rise, a fixed rate mortgage loan will stay at the same, low interest rate, unlike an ARM. If you are not planning a move in the near future (about five years), a fixed rate mortgage loan can especially be a great loan option. But if you do expect to move more quickly, you will need to consider an ARM with a low initial rate to get reduced monthly payments.
Refinancing to Cash Out
Is “cashing out” your primary purpose for your refinance? Your house needs improvements; your son has been accepted to University and needs tuition; or you are taking your family on a cruise. Then you will want to apply for a loan for more than the balance remaining of your current mortgage loan.In that case, you want You may not have an increase in your mortgage payment, however, if you have had your existing mortgage loan for a long time, and/or your interest rate is high.
Maybe you want to cash out a portion of the equity in your home (cash out) to use toward other debt. If you have any higher interest debts (like credit cards or vehicle loans), you may be able to pay that debt off with a loan with a lower rate with your refinance, if you have the home equity built up to make it work.
Getting a Shorter Term Loan
Are you planning to fatten up your home equity faster, and pay off your mortgage loan sooner? You should consider refinancing with a shorterterm loan, often a 15-year mortgage loan. Even though your mortgage payments will usually be increased, you will save on interest; so your home equity will rise up faster. On the other hand, if your current long-term mortgage loan has a small remaining balance, and was closed a number of years ago, you might be able to make the switch without paying more each month.
To help you figure out your options and the numerous benefits of refinancing, please contact us at 800-707-3683. We are here for you.
What you need to get ready before applying for a mortgage loan.
In general, the documentation you will need includes:
Check for application fee
Property Information (if you already have a contract on a house)
Copy of legal description and MLS sheet.
If you are selling your current home: copy of listing contract
If you have sold your current home: copy of settlement statement (HUD-1)
Income & Assets
Pay stubs for the last 30 days
For the past 2 years:
Names and addresses of each employer
Statements for each bank, mutual fund, and/or investment account for the last 3 months
Estimated value of personal property and furniture
If you have made any large deposits to your accounts:
Explanation and source for deposit
If large deposit was a gift:
Signed gift letter (lender can supply)
Copy of gift check
Copy of deposit receipt
If you own more than 25% of a business:
Corporate or partnership tax returns
Tax returns for the last 3 years (with schedules)
Year-to-Date Profit and Lost Statement prepared by an accountant
If you own rental property:
Tax returns for the last 2 years and current rental agreements
If you are retired:
Pension Award Letter
If you receive Social Security:
Social Security Award Letter
If you are counting child support as income:
Copy of divorce settlement
Copy of 12 months of cancelled child support checks.
Names, addresses, account numbers, balances and monthly payments on all current loans
Explanation of credit report anomalies, including:
Late payments, credit inquiries in the last 90 days, charge-offs, collections, judgements and/or liens
Bankruptcy filed within 7 years (bring a copy of your bankruptcy papers)
Copy of DD Form 214, Report of Separation
Photo ID and proof of Social Security number
Residence addresses for the past 2 years
If applicable, a copy of your divorce decree
If you are not a citizen: a copy of the front and back of your green card
What is the difference between the interest rate and the A.P.R.?
You’ll see an interest rate and an Annual Percentage Rate (A.P.R.) for each mortgage loan you see advertised. The easy answer to “why” is that federal law requires the lender to tell you both.
The A.P.R. is a tool for comparing different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the “true cost of a loan” to the borrower, expressed in the form of a yearly rate. This way, lenders can’t “hide” fees and upfront costs behind low advertised rates.
While it’s designed to make it easier to compare loans, it’s sometimes confusing because the A.P.R. includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. And since the federal law requires lenders to disclose the A.P.R. does not clearly define what goes into the calculation, A.P.R.s can vary from lender to lender and loan to loan.
The A.P.R. on a loan tied to a market index, like a 5/1 ARM, assumes the market index will never change. But ARMs were invented because the market index changes and makes fixed rate loans cheaper or more expensive to make — that’s why they’re variable rate in the first placed!
So, A.P.R.s are at best inexact. The lesson is that A.P.R. can be a guide, but you need a mortgage professional to help you find the truly best loan for you.
Note when you’re browsing for loan terms that the A.P.R. will not tell you about balloon payments or prepayment penalties, or how long your rate is locked. Also, you’ll see that A.P.R.s on 15-year loans will carry a higher relative rate due to the fact that points are amortized over a shorter period of time.
Private Mortgage Insurance helps you get the loan.
Private Mortgage Insurance, also known as PMI, is a supplemental insurance policy you may be required to obtain in order to get a mortgage loan. PMI is provided by private (non-government) companies and is usually required when your loan-to-value ratio — the amount of your mortgage loan divided by the value of your home — is greater than 80 percent.
PMI isn’t a bad thing — it allows you to make a lower down payment and still qualify for a mortgage loan. In fact, without PMI, many of us would not be able to purchase our first home.
How is PMI calculated?
Your PMI premium is fixed based on plan type (loan-to-value ratio, loan type, loan term, etc.) and is not related to your particular credit history or other individual characteristics. PMI typically amounts to about one-half of one percent of your mortgage amount annually, according to the Mortgage Bankers Association, and the premium payment is usually rolled into your monthly mortgage payment. On a $200,000 mortgage, you may be paying $1,000 per year for PMI.
Before deciding on what terms they will offer you a loan (which they base on their risk), lenders must find out two things about you: whether you can pay back the loan, and if you will pay it back. To understand your ability to pay back the loan, they look at your income and debt ratio. To assess your willingness to repay, they use your credit score.
The most commonly used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. The FICO score ranges from 350 (very high risk) to 850 (low risk). You can learn more on FICO here.
Your credit score is a result of your repayment history. They don’t consider income or personal characteristics. These scores were invented specifically for this reason. “Profiling” was as bad a word when these scores were invented as it is in the present day. Credit scoring was developed to assess a borrower’s willingness to pay without considering any other personal factors.
Deliquencies, payment behavior, current debt level, length of credit history, types of credit and the number of credit inquiries are all considered in credit scoring. Your score is calculated with both positive and negative items in your credit report. Late payments count against your score, but a record of paying on time will improve it.
To get a credit score, you must have an active credit account with at least six months of payment history. This history ensures that there is enough information in your report to generate a score. Some people don’t have a long enough credit history to get a credit score. They should spend a little time building credit history before they apply.
To finalize the sale of the home a neutral, third party (the escrow holder, a.k.a. escrow agent) is engaged to assure the transaction will close properly and on time. The escrow holder ensures that all terms and conditions of the seller’s and buyer’s agreement are met prior to the sale being finalized, including receiving funds and documents, completing required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you clear title to your property before the purchase price is fully paid. The documentation the escrow holder may be collecting includes:
Fire and other insurance policies
Title insurance policies
Terms of sale and any seller-assisted financing
Requests for payment for various services to be paid out of escrow funds
Upon completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then transferred to the seller and appropriate title insurance is issued as outlined in the escrow instructions. At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. As your real estate agent, I’ll inform you of the acceptable form.
The Escrow Holder Will:
Prepare escrow instructions
Request title search
Comply with lender’s requirements as specified in the escrow agreement
Receive funds from the buyer
Prorate insurance, tax, interest and other payments according to instructions
Record deeds and other documents as instructed
Request title insurance policy
Close escrow when all instructions of seller and buyer have been met
Disburse funds and finalize instructions
The Escrow Hoder Won't
Give advice – the escrow holder must maintain neutral, third-party status
Offer opinions about tax implications
Mortgage Escrow Account
A Mortgage Escrow Account is established to pay on-going expenses while there is a loan on the house. These expenses include property taxes, home insurance, mortgage insurance, and other escrow items. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.