Top Four Things You Should Know Before Refinancing Your Mortgage
As per the Mortgage Bankers Association, a large portion of mortgage applications is covered by the refinancing ones. The reason is that today's low mortgage interest rates motivate homeowners-cum-borrowers to reorganize their finances. However, it is not at all necessary that a mortgage refinance is always the right option for you.
Your decision to get your mortgage refinanced depends less on the current mortgage interest rates and more on the individualistic circumstances. So here is a complete list of considerations that you should factor in before applying for a housing refinance anytime.
You will refinance the loan by analyzing your home's equity. Dropping the value of your homes across the US has left countless Americans underwater. That is because there are more mortgage lenders than the home's existing market value. If homeowners have a low equity, then refinancing is not always a possibility-especially when the deal is done with a traditional lender.
However, a couple of specialized government programs are available for refinancing the mortgage if the home's equity value is low. An ideal way to know whether you qualify for a specified program is by visiting the lender and discussing your individual requirements. Homeowners having equity between 10 and 15 percent will find it simpler to qualify for a fresh loan.
In recent years, lenders have established stricter standards for having the loan approved. A few consumers may be surprised that they are not qualified for a low interest rate no matter how good your credit score is. In general, creditors like a score that touches at least 720.
However, some unconventional borrowers make sure that you get the specific loan no matter where your credit score lies. Nevertheless, if borrowers have a low credit score, they will get a fresh refinances loan in Hollywood, FL, but at pretty high rates.
If you have a mortgage loan, you may think that it is simple to grab a new one. However, lenders not only have raised the bar for credit scores but also have become strict with your debt-to-income ratio. A stable job history, high income, or substantial monthly savings may not be the only factors that matter when it comes to getting a loan.
Nowadays, lenders want a high debt-to-income ratio if they need to approve your loan request. So with a lender, you can expect your monthly housing payments to get under 28 to 31 percent of your income. In general, the debt-to-income ratio should ideally be 36 percent. Put simply, you may have to pay a large portion of your debt before getting your refinancing application qualified.
When it comes to refinancing your home, it will cost you anywhere between 3 and 5 percent of the total loan amount. However, borrowers can find a number of ways to bring down the total costs of a loan. If you happen to have enough equity, then you may easily add the costs in a new loan while improving the principal.
A few lenders provide a "no-cost" refinance, which means that you will pay a bit higher interest rate to make up the closing costs. However, before finalizing the loan, you should always negotiate the rate with the lender or should shop around for a better interest rate.
So, to conclude, we will put it like this-mortgage refinancing is a complex affair, and that is precisely why it needs your due diligence. Nevertheless, if you have contacted a reliable lender, then you will know that whether or not refinancing the best option for you.