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Refinancing Your Mortgage - Make a PlanMore and more Americans think of refinancing their mortgage. Economic recession caused the situation when mortgage rates holding below 5%. Refinancing is a way to low mortgage payment, reduce interest rate, or at least lock in a long-term low rate. The goal of а refinancing - to free up cash for other needs, such as repaying other debt or replenishing your retirement accounts, while reducing your financial stress.In spite of a great desire to refinance the mortgage statistics says that one in four customers can't get a loan approved. There are some obstacles on the way to refinancing such as one-two punch of tighter credit and falling prices. Also you should know that most single-family home loans today need to fall within Fannie Mae and Freddie Mac limits - up to $417,000 in most places, and up to $729,750 in certain high-cost cities such as San Francisco and New York. "Jumbo" mortgages, or those larger than those limits, are still very hard to find. On the first stage bank will determine whether you can refinance at all and how close you can get to the lowest rates available. Your credit score and your home's current value - are the main crucial information. During the determining you can be asked to provide different information and documents, pay stubs, bank statements, brokerage statements and maybe tax returns to convince the lender that you can and will repay the loan. Here's what you need to know before you start the application process: 1) If your current mortgage is less than 80% of the value of your home or less than 75% of your condominium or co-op, you should have refinancing options. If your mortgage is between 80% and 105% of your home value, you're current on your payments and you may be able to refinance under a two-month-old government program called "Making Home Affordable''. 2) The next important question: what's your home worth? Appraisers may use foreclosure sales or other distressed sales in your area to assess your home's value, not just conventional sales. And since the appraisal is for the benefit of the lender, not the consumer, you have little, if any, say in the process. If you're worried about what your home will be valued at, see if a friendly real-estate agent will provide you with recent similar sales in your neighborhood. Otherwise, you may have to fork over an appraisal fee - $350 to $500, depending on where you live - to find out if you have enough equity, even if you don't qualify for the loan. 3) Whether you get today's lowest rates will depend next on your credit score, a measure of how big a credit risk you may be. Borrowers who want the best rates generally need a FICO score - based on a formula developed by Fair Isaac Corp. - of 740 or above out of a possible 850. Those with FICO scores between 620 and 740 will pay either higher interest rates or more upfront "points" or fees, and those with scores below 620 may not be able to land a loan at all. 4) If you have a second mortgage on the property or a home-equity credit line, you'll have one more hurdle. Some second lenders are refusing to stay in second place when you try to refinance your first mortgage. In that case, your options are to roll the two loans together, if you have enough equity; pay off your second loan; or find a new second lender who will allow you to refinance the first loan. 5) If your current loan is less than three or four years old, it may make sense to start over with a new 30-year mortgage. But otherwise, try to avoid going backward. If you last refinanced in the 2003 boom, for example, go for a 15-year or 20-year mortgage to cut your future interest payments and pay off your home quicker. |
