Refinancing

COULD YOU USE A RAISE? Your house may be able to give you a raise by refinancing. Currently interest rates are near historic lows, so refinancing can reduce your mortgage payment. 

How much depends on the following:

• Your current rate.
• Your credit score.
• The amount of equity in your house.
• Repayment ability.
• The current value of your home must be more than the mortgage to paid off. Each program has different requirements for the loan to value for a new loan.
• The type of program you would qualify for.
  
  Let’s look at the type of savings you might expect.

What should I consider if I want to refinance?

• Is there enough current value (determined by an appraisal) to be able to pay off my existing mortgage and the closing costs?
• How long do I plan to stay in my home?
• How long will it take to recover my closing costs with the lower rate? We can help you calculate the cost recovery period.
• Would I benefit from consolidating some of my installment or credit card debts to lower my overall monthly costs?

How can I find out what my home is worth?

• DON’T have an appraisal done. The lenders require a totally independent appraisal so they won’t use an appraisal you have ordered.
• Do consider getting a “Broker Price Opinion”. This an assessment that is prepared by a realtor that gives their estimate of the value of the home. Generally the Broker Price Opinion will cost $75 - $100, as compared to appraisals that range in cost from $300 to as much as $700 for a multi-family property.

How long will this take?
With the new appraisal and lender underwriting guidelines all types of financings take longer than when you first bought or refinanced your home. Why?

• Appraisals are now ordered by the lender from “appraisal management companies. These are nation companies that contract with local appraisers to do the appraisal. This adds time to the process, sometimes a week or more for the appraiser to come out to assess the property.
• The appraisals are much more comprehensive in terms of the market research that is required of the appraiser. This gives the lender a better idea of the trend of sales for similar homes.
• Underwriters scrutinize applications much more carefully than in prior years. Between mortgage fraud and the sharp declines in real estate prices the lenders are requiring more information from borrowers and appraisals and taking more time to review files for inconsistencies or items that need more explanation.
• Lenders now request verification from the IRS for the tax returns on ALL loans. This can take two to three weeks or longer. The loan will not be approved until they can compare what you have submitted with what the IRS reports.

The Bottom Line:

• Expect the process to take longer.
• Expect to have to provide more information.
• There is even more paper work.

But in the end you will have a great rate and save money!