Find The Best Home Refinancing Rates
There are advantages to being in a low interest rate environment: it may actually be a good time to save money on your loans! A lot of homeowners are taking advantage of lower rates by looking into refinancing. When you refinance, you can rework the terms of your loan and lower your payments, thereby saving on your monthly bills. Refinancing can allow you to change or modify your payment terms — perhaps switch to a fixed rate mortgage from one that is variable. Or you can peg down lower interest rates or even opt for shorter loan terms in order to pay off your mortgage more rapidly. So if you’re interested in freeing up your cash for other purposes, then looking at the following best home refinancing rates can help.
Specify your state, the purpose for the loan you are applying for, how much you intend to borrow and what kind of loan you are interested in (whether Fixed, ARM, VA or FHA, for instance):
Things To Be Aware Of When Refinancing Your Home
As we all know, the real estate market can change drastically. When home prices and values drop, people can’t just pick up and move too easily. The same goes for the lending and financial parts of the equation. In America, at least 70% of homeowners have a mortgage on their home. Knowing what is required in today’s lending world prepares you for that next step.
How The Refinancing Process Has Changed
The Effects of A Declining Housing Market
When values decline in housing markets, there is less opportunity for people to find debt consolidation loans or to readjust their mortgages. For cash out mortgages, conventional loans may max out at 80% of the appraised value of your home. Cash out mortgages are mortgages in which you borrow against your home equity to pay off other debts or just to acquire more cash. Typically, a smaller amount (around $500) isn't defined as a cash out refinance. You can ask your lender what dollar amount defines a “cash out” refinance. When you have a government-backed loan, such as an FHA or VA mortgage (backed by HUD), the max cash-out cutoff is 85% -- that's an additional 5% cash that you can get back! However, you will need to consider the additional costs involved with an FHA or VA loan. For instance, an FHA loan requires private mortgage insurance (PMI), and VA loans charge a VA finance fee. Both can become quite costly (PMI was just raised to 2.25% of your loan amount) if you don’t weigh the pros and cons of the initial costs, the savings you will get from the cash out, and the long-term costs of refinancing.
Alternatives to Home Refinancing
There are other options available to help you get a handle on your finances. In fact, if you don't need to cash out or pay off debt with your mortgage, some great options are available now that weren’t available just a few years ago. The government offers new refinance options for borrowers (in response to economic forces). There is a program (the Making Home Affordable program or "MHA") that applies to any homeowner who has a loan backed by Fannie Mae or Freddie Mac. Your current home loan lender, who most likely just services your mortgage, can tell you whether you qualify. The actual investor is probably either Fannie Mae or Freddie Mac, unless you have a jumbo mortgage, an FHA or VA mortgage, or you have an “outside the box” type of loan. This same program also offers home loan modifications to homeowners that don’t qualify for a refinance or who are struggling to make payments. You can contact your bank for more information.
The Benefits of Refinancing Your Home
The most obvious benefit that comes to mind is taking advantage of the incredibly low interest rates that may be available. But another benefit is that the MHA program usually does not require an appraisal. Note, however, that about 10% to 15% of the houses backed by Fannie Mae or Freddie Mac do not have a predetermined value and will require full appraisals. But not getting an appraisal will save you $300 to $450 that would have otherwise been rolled into your loan or paid upfront. MHA loans are lighter in documentation too: your lender won’t always require pay stubs or a W2. Lenders are becoming very competitive with closing costs right now -- there are some fantastic deals out there if you are willing to negotiate with your loan officer. Don’t be afraid to check around to make sure you’re getting the best deal. More deals are available if you've got excellent credit -- a credit check such as what you can find in an Equifax consumer credit report can give you some idea how well you'll qualify for cheaper loans.
FHA and VA Mortgage Borrowers
Streamline refinance options exist that require little or no documentation as well. Typically, these loans require you to get an appraisal. However, HUD recently changed their guidelines to state that if you are refinancing your HUD-backed mortgage with a Streamline Refinance and no appraisal, you must bring all closing costs in cash to the table at closing. This can be cumbersome for borrowers that are already strapped for cash. They did, however, state that if the borrower does obtain an appraisal and the LTV (loan to value, or loan amount percentage based on the home's value) restrictions are met, borrowers can roll their closing costs and escrows into the new loan. That is much more financially feasible for struggling borrowers.
The Bottom Line With Refinancing
Most importantly, as with everything else in life -- explore all of your options when looking at home loans and home refinancing rates. If you have a loan officer that is trying to steer you into a loan program or not giving you more than one option for refinancing, then they probably don’t have your best interest in mind. Look around to get what’s best for you.