Mortgage Refinance Do and Dont’s For Today’s Market

With interest rates on 15- and 30-year mortgages, either near or at historic low levels, now might be the best time in history to refinance your home’s mortgage.  However, the reality is that many homeowners are having a very difficult time in obtaining financing because of the unstable real estate values and uncertainty that is dominating the market.

Understanding the do and dont’s when it comes to your mortgage is paramount in setting the foundation of your financial future. So, get educated and make decisions for the long run and not the short term.

The first thing you need to discover is if you can refinance or if you can’t. Simple as that.

The facts are that with rates at historic lows, your chances of getting the loan you need is also at a historic low. If you have bad credit, no equity in your property, then there most likely is no chance that you are going to be able to find a loan. Maybe it’s time for a loan modification?

 If your income has been reduced since you purchased, your home’s value has plummeted, you’ve assumed a lot of new debt, or your credit score has gone down, you may find it very difficult to refinance, or you’ll at least pay a lot more to do so.  However, if you have great credit and sufficient equity, you most likely will be able to refinance.

Refinancing these days is harder than it once was, for a few reasons.

The whole financial world has changed, our economy is in the tanks and the value of real estate everywhere is going down by the second. Many homeowners just do not have sufficient equity in their homes, mostly because the value of their properties have plummeted below what they owe on the mortgage. This is known has being underwater.

Compounding homeowners problems are the limited mortgage options and tight restrictions being implemented by lenders everywhere or should I say, what left of them.

Good luck locating a lender who will offer you a “stated income” loan. These loans were intended for people who had a hard time verifying income, such as the self-employed. But in recent years, some borrowers used stated income loans to artificially inflate their income to qualify for bigger mortgages. Without increased income or equity, these borrowers will have a hard time qualifying for more traditional refinance mortgages for the same amounts.

Here are some mortgage refinance do and dont’s to help you if you feel that you can make the grade:

• You have to really analyze their financial position before determining whether or not now is the time to refinance. Some say a good rule of thumb of deciding when to get a new loan is if your mortgage rate is a full percentage point or more higher than current rates. If your loan is at or a tad below, then it is not worth the cost and fees you will pay in the long run.
• While 720 is still considered by some to be a solid FICO score, it’s not good enough to obtain the best rates in today’s refinancing market. 740 is the new benchmark folks. Borrowers will need a FICO score of at least 740 to get the best rates.
• Get a note pad and some paper and write down everything that you are told. Name of the lender, loan officer, rates, margins, fees, cost of the appraisal etc. This is a simple idea that almost 85% of borrowers do not do.
• Call the big banks or your local credit union. Yes, the big players that are left are mortgage lenders like Chase, Wells Fargo, Bank of America etc. Local credit unions are also a great source for low cost mortgages to borrowers with great credit. They generally waive closing costs for members, and have extremely competitive rates.
• If you can get a loan, most likely these type of lenders will offer you the best deal and there is no reason to use a middle man like a mortgage broker when you can play the big 3 off each other and play your own game of compete for my mortgage. This is when your notes will come in handy.
• The transaction fees and points a lender charges can vary from bank to bank and sometimes from loan officer to loan officer. Higher fees, of course, eat into the potential savings of a reduced mortgage rate. So the lower the fees, the better. Compare, shop and make these guys and gals compete for your loan. They need your loan and business just as bad as you do.
• If you have got this far, it is time to clean up the house before an appraisal. The size of your home loan depends on how much the appraiser thinks your home is worth. Simply by sprucing up your house, doing some cosmetic enhancements, and even painting a few rooms, you can help boost your home’s value.

The HOPE for Homeowners Act. In 2008, the federal HOPE for Homeowners Act was enacted to help refinance their currently unaffordable variable rate mortgages into affordable 30-year fixed rate mortgages insured by the Federal Housing Administration (FHA), if their lenders agree to participate.

The effects or statistics have not come out as of yet on when lenders will start offering this program.

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