There are many reasons why homeowners opt to refinance, from obtaining a lower interest rate, to shortening the term of the loan, to switching mortgage loan types, to tapping into home equity.
Here are 4 essential questions that you should ask before signing on the dotted line.
1. How Much Equity Do I Have In My Home?
Equity is the difference between what your home is currently worth and what you owe on it. A Home worth $250,000 and you have a mortgage for $225,000 means you have $25,000 in equity. It also means that will need a loan for approx. 90% LTV (loan to value).
If you have equity, that’s 1 step toward being able to qualify for a refinance. BUT…even if you do not…even if you owe more on your home than what it is worth there are 4 programs that will enable you to take advantage of today’s low rates REGARDLESS of your equity situation. Contact me for more info.
2. Do I Have A Good Credit Score?
The health of your credit score plays a huge role in the type of mortgage rate you’ll be able to qualify for.
Most lenders will look at your credit score as a part of determining whether or not to make you a loan. With most lenders, your rate will depend on your score and the higher it is, the lower your payment will be.
Generally, 620 credit scores are the lowest that will qualify you for any loan.
3. Will I Qualify For The Rate I Want?
You might be able to get a general sense of the type of interest rate you could get for a refinance as quoted on financial websites like
http://www.firstmidwest.com/neilcoleman/,
but your specific financial details, such as the type of loan you’d like to refinance into or your credit score, will influence the actual rates that will be available to you.
4. Do I Have A Second Mortgage?
Borrowers who have a second mortgage might face additional challenges when it comes to refinancing their home. In this case, you may be able to pay off the second mortgage by combining both loans into a bigger first mortgage.
Otherwise, the lender providing the second loan has to agree to staying in second place (subordinating) behind the lender holding the first mortgage, which they usually are willing to agree to.
The bottom line is: refinancing might be a great way to help you pay off large debts or save money. However, it’s critical that you analyze your specific financial situation.
Get in touch with an experienced mortgage specialist today to discuss your needs and to determine if refinancing your home is right for you.
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