The mortgage industry has gone through several changes in the last few years. The ability to refinance your home loan has become increasingly difficult, and lenders are requiring borrowers to jump through more hoops than ever. Many homeowners are trying to take advantage of historically low interest rates, but have been surprised by the numerous changes that have taken place and the high qualification standards. There are a few things you should know prior to calling your mortgage broker.
You now need to have a very high credit score in order to qualify for a mortgage refinance. In years past, it seemed that a pulse and the ability to fog up a mirror where the only requirements for refinancing. Now, almost every lender requires a minimum of a 620 Fico score, and many require at least a 660. Lenders will also charge higher interest rates for lower scores as well as cash out. Make sure you get a copy of your credit report and review it for accuracy. You can also improve your credit scores quickly by paying down balances on current debts. It may be a very difficult task, but making sure your credit report is accurate can cost you thousands in the long run.
Homeowners will also need to exercise patience when attempting to refinance a home loan. Due to the lowest rates that many have ever seen, mortgage lenders have been extremely busy with refinance activity. In addition, the housing market that has began to show signs of life. Lenders downsized in 2008 and are now a bit shorthanded to handle the flurry of business. This means that the refinance process can take from 30 to 60 days with some lenders or brokers. Increased underwriting standards have also extended the lending process, so borrowers need to know the entire process is now going to take longer than before.
The most painful aspect of the entire refinance process is the fact that most homes have significantly decreased in value. The value of a home will determine the program and products available to homeowners. Recent programs introduced by Fannie Mae and Freddie Mac will allow loans up to 105% of the value of the home. Be prepared to hear a very low number when you ask about your value. To find out if your home is owned by Fannie Mae (fanniemae.com) or Freddie Mac (freddiemac.com) you can visit their websites or simply call your lender to find out who owns your mortgage. Please understand that owning and servicing your mortgage are not the same thing. You pay your mortgage company, but they may not own your loan.
Points are now a common aspect when you attempt to refinance your home loan. The rates you see quoted online, in the newspaper, and on the television commercials usually include points. The days of the zero point, zero closing cost loans have disappeared. Lenders no longer rely on servicing loans for years to come in order to make money, so fees will be charged up front. You will also find that points can significantly reduce your interest rate and mortgage payment, and potentially save you thousands during the life of your loan. Find out how long it will take to make back the total cost of points by talking to your loan officer. Don't assume points are bad....you may be surprised at how much 1 point can reduce your mortgage payment. You will need to have a good idea of how long you plan on staying in your home to determine if it makes sense when refinancing.
The mortgage industry is changing daily, and you need to work with a mortgage professional that understands these changes and can help guide you through the process. To find out more about the options available for your mortgage refinance, call Tim Marose today at 240-463-3224 or apply online.
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