We strive to live the American Dream of homeownership. Our goals are simple: A few bedrooms, someplace to lay down roots & watch our equity blossom. People tell us to stretch to get in to the most house that they can afford. They look for what appears to be the least pricey mortgage & pick some paint colors. It’s only a few years later that they recognize that things are a tiny tighter than expected, some hefty home improvements are needed & they have some nagging credit card debt hanging over us. Our mortgage is no longer fitting us & they need the scoop on how to refinance a home.
Things to Collect: Irrespective of your situation, you will need the following information before you make any contact with a lender:
1. Copy of current loan Note (Usually a document titled “Promissory Note”)
2. Most recent mortgage loan statement with the balance of the loan
3. Dollar amount of homeowners insurance & annual property taxes (for escrow calculations) - You can call your City Treasurer for tax information.
4. Pay stubs (for gross & net every month income)
5. List of any other loans & their maximum payments
6. An idea of your credit score (You can order a free document online.)
Understand What You Can Afford: In case you are planning to refinance a home loan, you are either:
• Checking to make sure you are getting the best deal around;
• Finding yourself in a tight position due to job loss, reduced income, an adjustable rate loan or are in over your head with debt;
• Have concerns about the future & need to shore up your finances before you are stuck in a difficult position with fewer options.
All two of these situations necessary that you must complete a budget to select exactly what you can afford. Mortgage lenders will generously permit borrowers to take loan payments that are up to 28% of their gross every month income, but this may be way much for plenty of people. A budget is basically every month take home pay less every single expense.
Be sure to include everything: Loans, utilities, tuition, food, dining out, kid’s lunches, vending machines, entertainment, gifts, subscriptions, medical deductibles. Also, be sure to permit 10-20% to be set aside for savings. What is left is what you can afford for your mortgage payments (including tax & insurance escrow). Don’t let any lender persuade you that you can afford more.
Pick a Lender You are Comfortable With: In case you are having trouble due to a “hardship” situation i.e. job loss, medical expenses, then contact your current lender first. There is a federal program called "The Making Home Affordable Program" that can help lenders work better with their customers in these situations to refinance a home.
In case you need a better rate, shop around. Banks & credit unions are usually very straight forward & use traditional documentation when they refinance a home loan. Most will need an 80% loan to value (LTV) or better. You can check out sites, like Zillow.com to get an idea of what similar homes in your area are going for. In case you have at least a 93.5% LTV, you will need an FHA loan. Mortgage brokers will have a variety of loan packages
That you may be able to think about. The key difference is that with a broker, all loans will be sold to a servicer, so you will certainly be dealing with a different company after closing.
In case you plan on staying in your home for at least 5 years, you may need to think about “buying down” your rate by paying points. Each point represents 1% of your mortgage amount that you pay at closing to reduce your rate of interest. Fixed rates are much simpler to budget for. Adjustable rates(ARMs) will carryover uncertainty of future changes in your payment amount. In case you select an ARM, be sure you fully understand how high rates can go, when they can modify & what that may mean to your payments.
Be sure to understand every single term of your loan agreement(s) & every fee that you will be bound to pay. Never be afraid or ashamed to ask questions & never accept an answer that you don’t fully understand. A final note of caution: Two times you agree to complete a loan application, the lender will be pulling your credit document. This credit document will help to select what rate of interest you will qualify for. plenty of inquiries on your credit document can have a negative effect on your score, so narrow down the
Lender(s) that you feel comfortable with & have most of your questions answered prior to agreeing to complete an application to refinance a home.
Things to Collect: Irrespective of your situation, you will need the following information before you make any contact with a lender:
1. Copy of current loan Note (Usually a document titled “Promissory Note”)
2. Most recent mortgage loan statement with the balance of the loan
3. Dollar amount of homeowners insurance & annual property taxes (for escrow calculations) - You can call your City Treasurer for tax information.
4. Pay stubs (for gross & net every month income)
5. List of any other loans & their maximum payments
6. An idea of your credit score (You can order a free document online.)
Understand What You Can Afford: In case you are planning to refinance a home loan, you are either:
• Checking to make sure you are getting the best deal around;
• Finding yourself in a tight position due to job loss, reduced income, an adjustable rate loan or are in over your head with debt;
• Have concerns about the future & need to shore up your finances before you are stuck in a difficult position with fewer options.
All two of these situations necessary that you must complete a budget to select exactly what you can afford. Mortgage lenders will generously permit borrowers to take loan payments that are up to 28% of their gross every month income, but this may be way much for plenty of people. A budget is basically every month take home pay less every single expense.
Be sure to include everything: Loans, utilities, tuition, food, dining out, kid’s lunches, vending machines, entertainment, gifts, subscriptions, medical deductibles. Also, be sure to permit 10-20% to be set aside for savings. What is left is what you can afford for your mortgage payments (including tax & insurance escrow). Don’t let any lender persuade you that you can afford more.
Pick a Lender You are Comfortable With: In case you are having trouble due to a “hardship” situation i.e. job loss, medical expenses, then contact your current lender first. There is a federal program called "The Making Home Affordable Program" that can help lenders work better with their customers in these situations to refinance a home.
In case you need a better rate, shop around. Banks & credit unions are usually very straight forward & use traditional documentation when they refinance a home loan. Most will need an 80% loan to value (LTV) or better. You can check out sites, like Zillow.com to get an idea of what similar homes in your area are going for. In case you have at least a 93.5% LTV, you will need an FHA loan. Mortgage brokers will have a variety of loan packages
That you may be able to think about. The key difference is that with a broker, all loans will be sold to a servicer, so you will certainly be dealing with a different company after closing.
In case you plan on staying in your home for at least 5 years, you may need to think about “buying down” your rate by paying points. Each point represents 1% of your mortgage amount that you pay at closing to reduce your rate of interest. Fixed rates are much simpler to budget for. Adjustable rates(ARMs) will carryover uncertainty of future changes in your payment amount. In case you select an ARM, be sure you fully understand how high rates can go, when they can modify & what that may mean to your payments.
Be sure to understand every single term of your loan agreement(s) & every fee that you will be bound to pay. Never be afraid or ashamed to ask questions & never accept an answer that you don’t fully understand. A final note of caution: Two times you agree to complete a loan application, the lender will be pulling your credit document. This credit document will help to select what rate of interest you will qualify for. plenty of inquiries on your credit document can have a negative effect on your score, so narrow down the
Lender(s) that you feel comfortable with & have most of your questions answered prior to agreeing to complete an application to refinance a home.
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