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Refinance Mortgages

Many homeowners elect to refinance mortgages to obtain a reduced interest rate. This can be a smart financial decision when borrowers hold a first and second mortgage. Both home loans can be rolled into one new loan; reducing monthly payments and lowering the risk of default.

In order to refinance mortgages borrowers must apply for a new loan. Homeowners can refinance through their current lender or seek out banks offering the lowest rate of interest. Financial experts recommend shopping around for a new home loan before entering into an agreement.

Borrowers with exceptional credit have the luxury of choosing which mortgage lender they want to work with. Borrowers with less-than-perfect credit might not qualify for mortgage refinance. Much depends on their FICO score, debt-to-income ratio, employment history and financial ability to repay the mortgage note.

Banks are not the only lending institutions offering mortgage loans. Borrowers should consider contacting credit unions, mortgage companies, and thrift institutions when shopping for a home mortgage loan.

Borrowers who don't have a lot of time to compare home loans might consider using the services of a mortgage broker. Brokers are connected to a wide range of lending institutions and can locate lenders based on borrowers needs.

Mortgage brokers are not required to locate the best deal unless borrower's sign a contract authorizing them to act as their agent. Brokers must be licensed and adhere to federal regulations. Brokers generally charge a fee for services in addition to home loan mortgage application fees, origination costs and mortgage refinance closing costs.

Financial experts recommend borrowers contact a minimum of three brokers to obtain costs associated with refinancing. The National Association of Mortgage Brokers at namb.org provides a nationwide list of certified and licensed mortgage brokers.

When homeowners refinance mortgages it is important to understand the costs involved. Most mortgage notes include prepayment clauses which penalize consumers for closing the loan early. Additionally, the new mortgage will include closing costs which can amount to several thousand dollars.

Mortgage refinancing costs can be offset by obtaining a lower monthly payment. Although borrowers might incur closing costs of $5,000 to $10,000, refinancing might save them three to four times this amount in the long run.

Borrowers requiring assistance with refinancing mortgages can consult with brokers, lenders, or credit counselors. The U.S. Department of Housing and Urban Development (HUD) provides a list of approved nationwide housing counselors via their website at hud.gov.

Homeowners who hold FHA home loans can refinance mortgages under the Federal Housing Authority's Streamline Refinance program. Streamline allows borrowers to refinance loans without undergoing the credit-qualifying process.

Borrowers with subprime or conventional mortgages can apply for FHA loans when refinancing mortgages through HUD. The American Recover and Reinvestment Act of 2009 (AARA) increased loan limits of FHA-insured mortgages to $729,750; allowing more homeowners to qualify for federally-backed home loans.

Before refinancing mortgages it is important to understand what options are available and the pros and cons of each. Those unfamiliar with the process should plan to spend a minimum of four to six hours conducting research and comparison shopping.

We encourage you to spend time in our refinance mortgages article library to discover additional information and resources. It is generally best to stick to government agencies and respected lenders to obtain accurate information.


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Published on August 31, 2009 at 03:04 AM

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