Mortgage Refinance Guide

If you are refinancing your home mortgage loan, there are a number of things you can do to improve the loan you get when refinancing. Here are three tips to help you qualify for a better interest rate on your home loan.

I. Clean Up Your credit reports

The interest rate you qualify for on your new mortgage is mainly dependent on the sate of your credit reports. Mortgage lenders use your credit score to determine what they will charge you for financing your loan. You can improve your credit score by paying down the balances on your credit cards and making all of your payments on time. You should also review your credit reports from each of the three credit agencies for errors. Having errors in your credit reports will significantly lower your credit score and the interest rate you will be eligible for.

II. Save for Closing Costs and Fees

Starting a savings plan will help improve your mortgage application. Any money you can put in the bank or other investment accounts is viewed by mortgage lenders as an asset. The more assets you have with fewer debts, the less of a risk you are for mortgage lenders. The less of a risk you are, the lower your interest rate will be.

III. Shop Around For The Best Mortgage Loan

Comparison shopping when applying for a mortgage loan will save you thousands of dollars. Using the Internet to find mortgage loans will allow you to quickly compare loan offers from dozens of lenders. When comparing loan offers it is important to compare all fees and costs associated with the loans; simply using the Annual Percentage Rage does not give you enough to make an informed decision.

There is a way to quickly compare mortgage offers using documentation lenders are required by law to provide you upon receiving your application. You don’t actually have to submit an application to get this documentation. You can get your hands on the information and make a line by line comparison of all the loans you consider before applying. To learn more about mortgage comparison shopping for the best deal, register for our free mortgage guidebook.

If you are in the market for a mortgage and are unsure how to go about getting one, there are a number of mortgage misconceptions you may be familiar with. Here is a list of several common misconceptions to get you on the right path to homeownership.

Homeownership Requires a Large Down Payment

In years past if you did not have the necessary down payment of 20 percent you could not qualify for a mortgage. For many potential home owners with tight budgets this down payment is a barrier to home ownership. There are now a variety of zero down mortgage programs to help you purchase your home without a down payment. The most popular no money down mortgage is the 80/20 or piggyback mortgage. The main advantage of a piggyback loan is that you will not be required to purchase Private Mortgage Insurance in order to qualify; this could save hundreds of dollars on your monthly payment amount.

Fixed Interest Rate Loans Are Safest

While fixed interest rate mortgages have the advantage of predictable payment amounts that do not change over time, they are not the best option for every homeowner. If you are in need of the lowest interest rate or payment amount possible, an adjustable rate mortgage or an interest only or option mortgage would best meet your needs. The level of risk associated with an adjustable rate mortgage is very low in the short term; if you plan on staying in your home for a long time these loans become increasingly risky.

Mortgage Brokers Are Only Good For Bad Credit Loans

Many people think that mortgage broker can only help borrowers with bad credit. Mortgage brokers are valuable resources for finding bad credit mortgage loans; however, they can find competitive offers for any homebuyer. Brokers have access to loan offers you might not find doing your own research. A broker could help you match a lender with the best offer for a homebuyer in your particular financial situation.

To learn more about shopping for the most competitive offer while avoiding common mortgage mistakes, register for our free mortgage guidebook: “Five Things You Need to Know About Your Mortgage.”

If you are in the market for a new mortgage loan, there are a number of common mortgage mistakes that you need to be aware of. Many homeowners feel pressured to complete applying for a mortgage and rush through the process making a number of mistakes that cost them thousands of dollars. Here are several tips to help you avoid making costly mistakes when refinancing your mortgage loan.

Comparison Shop Using the Good Faith estimate

When you compare loan offers when shopping for a new mortgage it is important to request a Good Faith Estimate from each lender you are considering. The Good Faith estimate is a standardized form lenders are required to provide outlining all fees for the loan. Most lenders will provide this document if you ask for it. Make sure you pay close attention to the lender fees and the interest rates listed on the Good Faith Estimate.

Compare All Aspects of the Loans

Many homeowners get hung up on interest rates and neglect comparing closing costs and lender fees. These homeowners often overpay thousands of dollars for their mortgage loans. The Annual Percentage Rate is a good starting point for comparing loan offers; however, always use the Good Faith Estimate for comparing a breakdown of all lender fees and closing costs.

Provide Documentation Quickly

Many homeowners run into problems by not providing information and documentation promptly. This lack of communication can delay your mortgage and cost you the interest rate guaranteed by your lender. The rate guarantee you receive is only good for a period time; if you are unable to close on the new mortgage before the guarantee expires, the lender may raise your interest rate. To learn more about your mortgage options register for our free mortgage guidebook.

If you are considering applying for a home equity loan you might wonder if you qualify. When a mortgage lender evaluates your creditworthiness while approving your home equity line or second mortgage, there are three factors evaluated. These factors are your credit history, your income, and the loan-to-value ratio of your home.

Your Credit History

The state of your credit has a major effect on your ability to qualify for a home equity loan and the interest rate you receive. The better your credit, the more options you will have for your home equity loan, including a competitive interest rate. If you have poor credit, you can still qualify for a home equity loan; however, you will pay more for the financing. Before you apply for a home equity loan it is important to carefully review your credit reports and dispute any errors or negative information.

Your Income

The equity in your home is the portion you own. When you borrow against your home, the lender is granting you a loan secured by your equity. The mortgage lender wants to be sure they will get their money back. This is why lenders evaluate your income to determine your ability to repay the loan. To determine your ability to pay back the loan, the mortgage lender calculates your debt-to-income ratio. This ratio expresses how much of your income goes to paying your bills on a monthly basis. Most lenders want this ratio to be less than 38% of your income on a monthly basis.

Your Loan-to-Value Ratio

Assuming the mortgage lender is going to approve your home equity loan, the amount you can borrow is determined by your loan-to-value ratio. This ratio expresses how much you owe on your mortgage versus the value of your home. If a mortgage holder owes $70,000 for a home worth $100,000, this borrower’s loan-to-value ratio is 70%. Most traditional lenders want your loan-to-value ratio below 80%. There are non-traditional lenders that will lend well over 100% of your homes value; however, these loans are risky because they leave you with no equity as a cushion from the economy. You can learn more about your mortgage and home equity choices by registering for our free mortgage guidebook: “Five Things You Need to Know about Your Mortgage.”

There are a variety of reasons for refinancing your mortgage, regardless of what the economy is doing. Many homeowners choose to refinance their mortgages to qualify for a lower interest rate, lower their monthly payment, or cash out equity in their homes. If you are a homeowner considering a new mortgage loan, there are steps you can take to ensure hassle free refinancing.

Carefully Review Your Finances

Before you refinance your mortgage it is important to ensure your finances are in order and that you do not have inaccurate information in your credit reports. The credit agencies that maintain your credit records are prone to errors and having mistakes in your credit reports will significantly reduce your credit score. Your credit score is used to determine the interest rate you will qualify for; you want this score to be as high as possible.

Have Cash on Hand for Closing

When you refinance your mortgage you will go through the same process as when you secured your original mortgage. You will be required to pay many of the same fees you did when you acquired your original mortgage. These fees include an appraisal, insurance, title search, and lender fees. You can expect to pay between three and five percent of the loan amount in closing fees; however, these fees vary from one lender to the next, don’t be afraid to negotiate for lower closing costs.

Cash Back Debt Consolidation

When refinancing your mortgage you have the option of taking cash back from your home equity. You can use this cash to pay off your other high interest debt. If you use equity in this manner it is important to understand that debt consolidation does not eliminate debt, it simply moves it around to make it easier to manage. If you continue the pattern of spending that created youru existing debt you will find yourself sinking further in debt and wasting the equity you had in your home.

You can learn more about your mortgage refinancing options and common homeowner mistakes by registering for our free mortgage guidebook.