Understand the Facts about Mortgage Loan Refinancing
The housing market is still in crisis and more homeowners are getting underwater
. That is why mortgage refinancing is becoming an attractive option. With the rates still going down, refinancing could help homeowners obtain better deals from lenders.
The existing interest rates today are definitely more favorable to homeowners compared to a few years ago. Because of the lower rates, you stand to save a good deal of money each month. However, you should not raise your hopes too high. Although rates are getting lower, obtaining a mortgage refinance these days is also becoming more difficult.
In the past, obtaining an approval for a refinance application can be considered a walk in the park. Today, there are new requirements and regulations that you need to consider. For one thing, almost all lenders have altered their requirements. Secondly, a borrower should have excellent credit score before a refinance application will be entertained. Gone were the days when obtaining a fair rate was available for almost everybody.
Lenders are also imposing new fees for loan applications. This is actually a way for them to mitigate risks. But you can avoid the imposition of new fees if you have an excellent credit rating. It is not enough today to have a FICO score of 700. You must obtain a score of at least 740 or higher to get good refinance rates. If you are able to obtain a refinance loan with a 700 FICO score, you have to prepare yourself to pay more fees for the loan.
Borrowers who belong to the slow housing market should be prepared to tackle the issue of equity. If your property has low market value, then your equity to the home can be reduced substantially. Worse, the majority of lenders today will require you to have bigger equity to the property before your refinance application can be approved.
Several years ago, paying mortgage point was ill-advised. But paying for points is a good option nowadays if you want to obtain lower refinance rates. It is advisable also to pay points if you intend to stay longer in your house.
Several other costs must be paid also before you can obtain the loan. Some of these additional costs include loan preparation fees, underwriting, origination and appraisal, and many more. You will have to spend several hundred dollars to pay these added costs. By considering these costs and you compound them with the closing cost, the total fees for your refinance loan will become significantly higher. If you are determined to get a mortgage refinance, you have to carefully weigh the cost of the loan versus the low interest rate that you may obtain. The higher fees could sometimes offset the benefits of a low interest rate.
Before you apply for mortgage refinance, make sure to consider its benefits and downsides. You have to make sure that you can break even in a shorter period. It is also important to consider your future plans before you apply for mortgage refinancing.
There is no denying the fact that refinancing is a good option for homeowners. If you are planning to apply, just make sure to weigh its advantages and disadvantages. You need to ensure that you can obtain a more favorable deal from lenders.
Understand the Facts about Mortgage Loan Refinancing
By: Rob Blake
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