| Refinancing now might just catch you the lowest | | | | Before applying you should call several lenders, credit |
| interest rate of you life. It's not like a couple of years | | | | unions, national and regional banks and banks in your |
| ago when all you needed was a pay stub and an | | | | area. You should also call a mortgage broker. A |
| eager broker, today's process isn't as quick and | | | | mortgage broker that represents many lenders may |
| painless. The demand for mortgage loans are up and | | | | be helpful if your needs or qualifications aren't clear-cut. |
| the number of people processing mortgages is down. | | | | Plus, if your application is turned down, a good broker |
| Standards for obtaining a mortgage loan today are | | | | will either appeal or take the application to another |
| stricter. Here are some things you should know before | | | | lender that may approve the loan. |
| you refinance. | | | | When refinancing, it's a good idea to lock in the rate for |
| The 30-year fixed rate should stay around 5% for the | | | | a number of reasons. If the mortgage gets more |
| rest of the year. It might increase to 5.25% if the | | | | expensive than you can afford, you don't want the |
| economy improves. HSH's survey of lenders | | | | chance of rising rates to ruin the deal. You also don't |
| pinpointed the national average 30-year fixed rate at | | | | want to take the risk that the rates will change before |
| 4.97% in early May of 2009. The average 15-year rate | | | | closing. With how long the process is taking these |
| was 4.68%, and the average 5/1 adjustable-rate | | | | days, this could become a very likely scenario. Locking |
| mortgage (a five-year ARM that changes every year | | | | in your rate will cost you though. The lender will usually |
| after the fixed time period) was 4.91%. | | | | add a quarter of a percentage point to interest rate |
| The lowest interest rate will often be available if your | | | | for every 30 days you lock in your rate up to a period |
| loan is backed by Fannie Mae or Freddie Mac and if | | | | of 90 days. It is also possible that interest rates may |
| you're taking out a loan that falls within certain limits, | | | | decline. To be able to take advantage of that, you will |
| such as a conforming loan, you should have at least | | | | need to ask about a float down option. If rates |
| 20% or more in your home's equity and a credit score | | | | happened to drop a minimum of 0.25%, you would be |
| of at least 720. Thee are some additional factors that | | | | able to get the lower rate before closing the loan. |
| can help in refinancing that can help you obtain the | | | | Lenders most often charge a fee of $200-$300 for |
| lowest rate, such as living in the home that you are | | | | this option, but it can potentially save you thousands |
| refinancing, not taking out cash when you're refinancing, | | | | over the course of your loan. |
| and not trying to obtain a home-equity loan or a | | | | When it comes to the equity that's required before |
| home-equity line of credit. You can also often reduce | | | | you're able to refinance, Fannie Mae and Freddie Mac |
| your rate by paying discount points at closing. Each of | | | | require only 5% for a single family home that's you're |
| these discount points are equivalent to 1% of your loan | | | | living in. However, you will be required to obtain private |
| amount and each point will usually lower your interest | | | | mortgage insurance if you have less than 20% equity. |
| rate by a 0.25 percentage point. | | | | Private mortgage insurance protects the lender if you |
| For the best estimate of the rate for which you will | | | | default on the loan. With home prices declining this |
| qualify, you should supply the lender with your FICO | | | | becomes a problem, because mortgage insurers won't |
| score and an estimate of you home's market value. | | | | cover conventional loans if there is less than 10% and |
| You can obtain your FICO score online for around $8 | | | | 15% for jumbo loans. Private mortgage insurers can be |
| and you can get an estimate of how much the market | | | | very costly, and the added cost might just disqualify |
| value of your home is from a real-estate agent. Keep | | | | you from refinancing. With the FHA, you can refinance |
| in mind that when you apply to refinance your home, | | | | your home with as little as 2.25% of the equity in your |
| you will have to supply pay stubs from a recent | | | | home. The FHA provides its own mortgage insurance |
| month, bank statements for at least two months, and | | | | which will cost you an upfront premium and a monthly |
| W-2 statements for at least two years. If you are | | | | premium. Some FHA lenders require a minimum of |
| self-employed, you will need to bring tax returns for at | | | | around 580 to 620 credit score, but the FHA itself |
| least the past two years you are self employed, you | | | | does not impose a credit score minimum to qualify for |
| will need to bring tax returns for at least the past two | | | | refinancing. Fannie Mae and Freddie Mac impose a limit |
| years to prove you have self-sustaining income. To | | | | for mortgage loan payment to not exceed 36%$ of |
| speed up the process, you can fill out the application | | | | your monthly pretax income, the FHA sets there limit |
| and pay for an appraisal of the property ahead of | | | | at 31% of your monthly pretax income. |
| time. | | | | |