Posts Tagged ‘Mortgage Refinancing’

If you can go down from, six percent to five percent, that’s a substantial change for the better. Say you had a $150,000, 30 year mortgage at 6%? Your monthly payment for principal and interest would be just under $900. At 5% these payments would be a little more than $800. So you’d be saving nearly a hundred dollars a month by refinancing.

The fact remains – If you’re currently paying six percent interest, you’re potentially giving hundreds of dollars a month to the bank that you could be keeping in your own pocket.

Keep in mind, when you refinance, you will have to pay several hundred to several thousand dollars in closing fees. You can either pay those out of your pocket, or possibly add them to the loan amount.

It could take some time for you to recoup those costs, perhaps 3 or 4 years. Your lender can help you calculate all of this, but in general, if you think you may be selling your home in the next year or two, you would probably be better off keeping the mortgage you currently have.

And while we’re considering the future, consider whether you want a 15 or 30-year fixed loan. You could consider a shorter 3 to 5 year adjustable rate loan, but these mortgages are not as popular for refinancing, because as soon as you’ve realized your savings, it’s time to refinance again.

15-year mortgages allow you to build equity in your home much faster than 30-year loans do, and less of your monthly payment is going into the bank’s coffers. However, your monthly payments are also going to be higher, so you will have less money on a monthly basis to pay other bills or put away into savings.

If you choose a 30-year loan, your monthly payments will be lower, but you will also be spending much more over the course of your mortgage. The amount of interest you pay will actually exceed the cost of your home. On the other hand, you will enjoy much more liquidity in your monthly budget than you would with a 15-year loan. There is no right or wrong here. It is purely a matter of personal choice but a very important one to consider.

So the final question to consider and the toughest one to answer is when to make the jump and refinance your mortgage. Ask a hundred loan experts whether rates are going to go up or down, and you’re likely to get a hundred answers. We have seen rates creep up in the past few weeks, but they are still well below the rates of just a couple of years ago. You are very likely NOT going to find the exact best time to re-finance, because the rates change every single day.

If you’ve been sitting on the sidelines with a higher-rate mortgage for the past couple of years and watching the rates fall, we can promise you one thing you won’t get a lower interest rate, unless you get in the game. Call a lender today, and talk it through.

Don’t know a lender? Your REALTOR® does. He or she can hook you up immediately with a mortgage expert who can help you start saving money today!

A mortgage is usually the single biggest expense in most people’s monthly budget. So, it’s understandable that people want to spend as little on their mortgages as possible, which is why the lower interest rates can be tempting. But there are other things to take into consideration. Namely, you have to look also at your lifestyle and your personality.

The old-school, conventional fixed rate mortgages are still the most common. The biggest advantage: Peace of mind. Fixed rate mortgages appeal to buyers who want to lock in a rate they are happy with, and forget about it. It’s a great choice for people who want consistency in their budgeting and want to know all the time what their monthly payments will look like.

One question: would you prefer a 15 year, or 30 year mortgage? There are advantage to both options. Monthly payments on a 30 year loan are generally lower than on a 15 year loan. Those who opt for a 15 year loan build equity more quickly and pay less interest over the life of the loan.

However, whether it’s a 30, or 15 year note, getting a conventional mortgage often requires a big down payment — 20% or more!

If you don’t have that kind of cash in your savings account, then check out FHA loans. Guaranteed by the federal government, FHA loans are filled with incentives like rates and low down payments. Buyers who don’t have a lot saved for a down payment can put down as little as 3.5%. There are some restrictions, however, as to the types of properties you can buy because not all of them are eligible under FHA rules.

Now, for some people, the fixed rate route, is not the best route. For some people, ARMs, or adjustable rate mortgages, are the best option. They’re unpredictable, but that is not necessarily bad thing.

During the initial fixed period, the rate can be really low, meaning payments on that loan will be low. That fixed period generally lasts sometime between one and 10 years.
Many ARMs come with the option to convert to a fixed rate loan, for a fee. This might appeal to someone who enjoys watching rates going up and down and who will jump on a great fixed rate when the time is right.

These days, Balloon mortgages are rare, but if you look hard enough, you might be able to find one. In a balloon mortgage, the term is short, with a term of usually 5 to 7 years. The payments are low because they are based on a term of 30 year loan. They also carry a lower interest rate as well. But, there is substantial risk associated with balloon mortgages. The problem comes at the end of the term when the borrower needs to pay off the outstanding balance. And, the big question there is…what if property values have gone down? You might not be able to refinance.

There is usually an option to reset this type of loan, but it is not automatic and requires the borrower be in good standing at the end of the loan. It may also be a useful instrument for anyone who knows they are going to sell a property in just a few years, well before the loan has to be paid.

Now all these options can be confusing — talk to your REALTOR®, and explain your plans. Discuss your mortgage options – especially, how much risk is too much risk. This will help you be sure the mortgage you pick, is the right mortgage for you.

Mortgages and foreclosed homes
When purchasing a foreclosed home through an auction, or from a bank, the mortgage approval isn’t any different than a regular purchase other than the fact that you don’t have a property picked out. The process consists of applying with your lender, obtaining approval with a loan amount you are comfortable with, bid on a property at an auction, and after winning, providing a cashier check as a deposit, and 30 days is given to close on the property. But — especially with auctions — make sure you get a mortgage pre-approval. Finding out after you’ve provided a deposit, that in order to qualify for a mortgage you needed 25% down and not 10%, will cause you to lose your deposit check if you don’t have the larger down payment.

The process of “paying down” a mortgage
Most mortgages these days don’t have any penalties for pre-payment, and that means you can pay ahead on your loan any time you want. Paying down a mortgage with a fixed rate simply pays the balance and the payment stays the same; but if you have a adjustable rate or what’s called a hybrid, when you make an extra payment, it will be recast, re-amortized, and your monthly payment will go down.

And, just think — if you are able to make one extra payment per year and it can be done at once or a little extra every month, on a 30 year loan, you are going to have a savings off your principal amount, and save interest as well.

David’s website is www.cdreed.com

Mullins says that the three most crucial factors in securing a mortgage are:

1. have good credit
2. have enough money for down payment
3. have a stream of income
4. if you are self employed, document everything

Mullins suggests a obtaining a pre-approval while locking in your rates. Some lenders offer a float-down rate, where you pay a little extra but are guaranteed the ability to take advantage of rates if they go down. This also protects you should rates go higher, ensuring you will still have the agreed-upon rate.

Compared to two years ago, mortgages are much harder to get. One thing to keep in mind is down payments. A couple of years ago, they were non-existent in many cases. Most people could get a mortgage loan, with no down payment, fairly easily. Now, the lowest down payment loan you can find is 3.5% for FHA loans which have become very significant in the mortgage industry. These government-backed loans comprise one-third of all mortgage loans today.

Mullins recommends that you budget a 10% down payment when you are thinking about buying a home. Down payments vary depending on the market and credit conditions but 10% is a good benchmark.

Finally, consider your FICO credit score. For the best financing, you need to have a FICO score of approximately 720; not perfect but still strong. If you have a lower score, you could end up paying more. The main thing is to take a look at your debt and start to pay your bills on time. Do not open a new card, close an old one, or make a large purchase right before you buy a new home as those are all things that could decrease your credit score. Try to reduce your debt as much as you can, as it can be a large determinant in whether you get the mortgage loan or not.

Why are so many banks denying mortgages to qualified borrowers?

Buchanan seemed surprised, and appeared unaware of the problems some consumers were having obtaining loans, but began to defend the banks and their tightened lending standards, saying that loose lending was what had gotten the country into the trouble it was in now.

The REALTORS® were glad to tell him all about it.

Buchanan was clearly surprised by their reaction and surprised by their stories of qualified buyers were being denied mortgages. The exchange may have opened his eyes to the problem, and may have changed his mind about its solutions.

It may have been one of the more productive exchanges of the summit, because it epitomized one of the Summit’s biggest goals: to let the movers and shakers know what’s really happening in the real estate markets all across America.