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As rates continue to rise, this could be your last chance for many years to lock in a lower rate. As rates and mortgage amounts go up, the impact on your bottom line increases. Over time, this difference in rates can cost you thousands of dollars. 

Are you a good candidate for refinancing? When you refinance your mortgage, you pay off the remaining balance on your current loan and get a new one. You can get a new rate and new terms. You can get a cash-out refinance where you tap into the equity to extract cash and then get a new mortgage. You can even pay money in and take out a smaller mortgage. Those with adjustable-rate mortgages may be good candidates for refinancing. As mortgage rates climb, so will your monthly payments. If you lock in a fixed-rate mortgage now, you may be able to save thousands of dollars later. The same is true for people with high-rate mortgages who have since improved their credit. Today, most people aren't getting ARMs because the rates are about the same as fixed-rate mortgages. If you have an ARM, now is a good time to refinance into a fixed before rates get even higher. 

Cash-out refinance options. If you have outstanding higher-rate consumer debt and an above-market mortgage interest rate, a cash-out refinance might  be be a good option. That way you can consolidate all the debt into one presumably more affordable monthly payment. With a cash-out refi, you can use that money to pay off credit card debt (which usually carry higher interest rate) and get a new mortgage with better rates. 

What does refinancing cost? Refinancing fees vary by lender and state. Calculate when you'll break even on the new mortgage by taking into account the costs of refinancing and any prepayment penalty for paying off your mortgage early. On average, borrowers can expect to pay between 3 and 6 percent of their balance in refinancing fees. 
  • Application fee: We only charge a $28 credit report fee. 
  • Loan-origination fee: Our origination fee is 0 percent. 
  • Discount Points: It depends on if you want to lower your rate and pay loan-discount points. This is a discretionary expense. 
  • Appraisal fee: It varies from $525 for Conventional appraisal to $725 for FHA appraisal. Please inquire about our special appraisal credit program
  • Title and Escrow fee. 
  • Property insurance. Not really a fee since you have to incur this cost with or without refinancing.  
All of the above costs can be rolled into the new loan amount or you can ask the lender to pay them in exchange for a slightly higher interest rate (known as no-cost refinancing). 





Posted by Sam Kader on October 8th, 2018 12:42 PM

Now that you are a proud homeowner, the next major decision is whether you should refinance and lower your interest rate. The direction of market interest rates shouldn't impact your decision. Instead, you should refinance when it makes sense to you based on the following criterions:

1. How long are you planning to stay? You should consider refinancing when you can recover the closing costs in less than 5 years and that you are planning to stay at the property longer than 5 years. For example, if your new mortgage had costs of $5,000 and monthly interest savings of $200, then your payback period will be 25 months.

2.  Lock in a fixed rate mortgage. If you have an Adjustable-Rate Mortgage or ARM's - your monthly payments can move up and down as interest rates fluctuate. The closer you are to the re-set date and the longer you plan to keep your home, the riskier the adjustable-rate mortgage is. You should consider refinancing it into a fixed rate.  

3. Stop paying private mortgage insurance (PMI). If you have FHA loans originated in 2015 onward, refinancing to a Conventional loan is the only way to remove monthly PMI.  Private mortgage insurance protects lender if you don't pay back your loan. It is required if you put down less than 20 percent of your home's purchase. Now that you have at least 20% equity, refinancing from a loan with PMI to a loan without PMI make sense even if your rate is higher because you won't have to pay the monthly mortgage-insurance premium. Your new total monthly payment will be less than what you were paying before.  

4. Removing or adding a borrower. Whoever is named the borrower on a loan is responsible for making the payments. In a divorce agreement, the party who was awarded the house should refinance and remove the x-spouse of the deed of trust. Without refinancing - both names are still on the hook as far as the lender is concern. So potentially, if a spouse awarded the house defaulted, the ex-spouse's credit is equally destroyed.  

5. Cash-out refinancing. You can draw down on your home equity for some cash-out for any reason. Another option is to get a home-equity line of credit. You can use the proceeds to invest in stocks or mutual funds as long as you are not relying on your investment gains, plan to keep your home for a long time and have an excellent credit.  This strategy would work in rising home equity market and in positive Return-On-Investment (ROI) scenario.

You do not have to start over again with another 30 Year Fixed. Ask me about Fixed Mortgage products from 15 to 29 Year Fixed. Be advised that your monthly payment will go up if you choose a shorter maturity product. Use this online loan calculator to estimate your payment.

Unlike when you first bought the house - you do not have to have funds at closing. You have an option to finance your closing costs or pay for it at closing.

Posted in:Refinance and tagged: Refinance
Posted by Sam Kader on December 19th, 2017 6:41 PM

Negative equity seems to be declining nationwide. About 43 million homeowners now have positive equity while about 6.5 million are still negative equity. Homeowners equity rose by $2.1 trillion last year to $10 trillion. Positive equity makes it easier for homeowners to refinance and to sell their properties. California leads the pack with about 12.5% still underwater (13.3% nationwide) while Nevada tops the chart with 30.4% still underwater. Equity of less than 20% is considered "under-equitied" which is still better than negative equity but not as good as 20% equity. Call us if you in the "Under-Equtied" category for refinancing programs available for you. 

However, there is a flip side to the story. Homeowners are frustrated due to their inability to tap their home equity. Despite low interest rates, it's become harder to borrow. Banks are requiring pristine credit since the great recession of 2008. Banks must now hold more money in reserve for each home-equity credit line they extend. So home-equity lines have become a less attractive business for banks than loans that require lower reserves. Fannie Mae and Freddie Mac can now send home loans that default back to the banks that provided them inflicting losses on the banks. Fannie and Freddie also view cash-out refinancing as riskier now and have imposed higher fees to guarantee them. This makes such loans costlier for banks and consumers. Banks are increasingly focusing on the most credit worthy borrowers requiring an average credit score of 780 to get a home equity loan (barely 30% of households have scores that high).

Posted by Sam Kader on March 16th, 2014 11:37 AM

Rates are at historic low. Thinking about refinancing your mortgage?  Pay attention to these items:   

  1. Appraised Value. Consider a possibility that your house may worth less than what you think it's worth. Know how much you owe and what the Loan-to-Value (LTV) is when the appraiser arrives. Inquire with us if your LTV is greater than 80%. We may qualify you for government special programs
  2. Obtain Conditional Approval and lock the rate (30 day lock - cushion for any financing contingency).
  3. Do not start home improvements project prior to appraisal being completed.
  4. Consider shorterning the maturity from 30 year to either 10, 15 or 20 year mortgage. Rates are still attractive. But, payments will go up.
  5. Credit score preferably at 720. Minimum requirement is 620. Check for Dispute Account which can snag the refinancing process.  Inquire about our  special program if your credit score is less than 620.
  6. Do not open a new trade line, apply for a new credit card, departmental store, auto loan or anything that will impact the credit scores and create more liabilities.  In today's strick underwriting guidelines, borrower's Debt-to-Income (DTI) ratio must no go over 50% with 45% being preferred. Do check your credit report yourself. So much is depending on the scores and the content of the credit report. Eliminate any surprises early on during the process such as unknown collections, late payments, judgement or tax lien and disputed accounts.
  7. Do your shopping for mortgage rates within the first 30 days of loan application. This will reduce the impact on the credit scores and makes it easier for us to explain on all those inquiries. Even soft inquiries need to be explained. (Concern that new debt is created). 
  8. Do not close any of your existing accounts especially those with more than 3 years credit history.  If you are unhappy with the credit vendor - wait until your financing is done, then close the account.  
  9. Do pay all your bills on time.
  10. Do not quit your job. You may change job within the same field provided that it's at least a lateral move.
  11. Self-employed - Do talk to us first before you even started. Self-employed borrowers require special attention.
  12. Do keep the funds in the bank untouched until after closing.
  13. Do not make any large deposits (defined as more than 25% of the total monthly qualifying income for the loan) other than payroll checks without paper trail. By that I mean, I need to see a copy of the check and where does it come from.
  14. Real estate brokers - please review this checklist when writing up Purchase and Sale Agreement.
Posted by Sam Kader on June 20th, 2013 9:34 AM

Here are the highlights of the upcoming Home Affordable Refinance Program (HARP) 2 (program designed to help underwater homeowners to refinance):

  • The cap of 125% LTV has been removed.
  • Streamlined underwriting. No requirement for physical appraisals in many cases, speedy processing and the the elimination of fees imposed by Fannie Mae and Freddie Mac in recent years.
  • Only loans owned or guaranteed by FNMA or FHLMC are qualified.
  • Loans must be purchased or securitized on or before May 31, 2009. 
  • Can have 1 X late within the last 12 months but not in most recent 6 months.
  • May be used for primary, second home or investment property.
  • Maximum loan amount in King, Pierce, and Snohomish is $506,000 for 1 unit property and $618,300 for 2 unit property. In San Juan county - $483,000 for 1 unit property and $618,300 for 2 unit property.
  • Must have qualifiable income. Consult me if you are unemployed but cash rich.
  • Must be current on mortgage and all other bills as reported on credit report.

If neither FNMA nor FHLMC owns your mortgage, call the U.S. Department of Housing and Urban Development (HUD) at 800-569-4287 or visit HUD approved counseling agencies for FREE consultation.

Some pointers regarding HARP refinancing:

  • You do not have to reset the clock back to 30 years of mortgage payments. We can offer you a term ranging from 10 to 30 years for the new loan. Most homeowners opt for a 30 year term and this does entail a new 30 years of payments. However, with the lower interest rate and if you continued paying the original mortgage payment (extra amount) every month, less interest would be paid over time and the loan would be paid off faster than the original would have been.
  • You do not have to have sufficient cash up front to pay closing costs. We can evaluate if closing costs can be rolled into the new loan.

 

Posted by Sam Kader on March 4th, 2012 3:31 PM

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