So that ARM's run it's course, and it's time to pay the Piper! That's the issue thousands of Americans face daily; to many, its a quagmire that leads to financial ruin and foreclosure. To others, refinancing is the solution they seek. Some will be qualified, and many will not.
Is refinancing your home the answer to your troubles?Often, it's not. Refinancing comes with a slurry of issues,... some old, some new. That burdensome old credit score seems to jump off the page these days like snake eyes at the craps table. Then of course there's those dreaded "points" your friendly mortgage Broker or Banker will charge you on the front and back-end of your loan (after all, they have to earn a living just like you).
Expenses Associated With Refinancing
Discount points fee: This fee represents additional money you can pay to the lender at closing. If you pay more points it will lower the interest rate. Usually, for each point you pay for a 30-year loan, your interest rate is reduced by about 1/8th (or .125) of a percentage point.
Origination Fee: Fee charged by the lender/broker for evaluating, preparing, and submitting a proposed mortgage loan. Origination fees are often expressed as a percentage. A one percent loan origination fee is equal to 1% of the loan amount. Some lenders add origination points into their quoted points while other lenders add an origination point in addition to their quoted points. Origination Points are equal to a percent of the loan amount. 1.75 points is equal to 1.75% of the loan amount. Often the loan agent writing the loan will make 1 to 3 points (%) on your loan.
Application Fee: covers the lender's cost to process the information on your loan. Usually, you must pay this charge at the time you file the application. Some lenders may apply the cost of the application fee to certain closing costs. Generally lenders do not refund this application fee if you are not approved for the loan or if you decide not to take it.
Appraisal Fee: This fee ($150 to $400 depending on the size/price of the property) pays for an independent appraisal of the home you want to purchase. The lender requires this estimate of the market value of the house for the loan. Factors to be considered in determining market value are: present cash value; use; location; replacement value of improvements; condition; income from property; net proceeds if the property is sold, etc. The appraisal is a critical factor in determining how much of a mortgage the bank or mortgage company will approve.
Credit Report Fee: Three major national credit bureaus (Equifax, TransUnion and Experian) supply lenders with the information on your credit behavior. Consumers typically pay $45 to $55 for this report.
Title Search Fee: A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to make sure there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.
So how do you maneuver around these barriers?
LOAN RESETTING
What many don't realize, that if they actually pick up a phone and call their lender, they can reset their existing loan and avoid thousands in closing cost associated with a loan broker or banker; and most often, the credit score isn't even pulled. Banks have a "Loan Retention" department that handle's this for existing loans, and the only real requirement is that you be current on your payments.
Now you may not get to enjoy those dirt cheap rates you keep reading about in the paper (not many do), but in most cases you can drop a rate that's creeped up to 8.9% down to around 6%, and believe me, that's a real savings. Best of all, it can be accomplished in a matter of days, handled over the phone, with a general fee of about five hundred dollars.
So even if your not on the brink of financial ruin, but your rates higher than you like, and you can't stomach the idea of paying thousands in closing fee's on a new loan (lowering your rate, but raising your debt) try picking-up that phone and speaking to your lender about resetting your current loan.
Come'on you can do it, don't be shy, no need to refi.
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