Question 1

When I should refinance?

Accepted Answer

It's generally a good time to refinance when mortgage rates are 2% lower  than the current rate on your loan. It may be a viable option even if  the interest rate difference is only 1% or less. Any reduction can trim  your monthly mortgage payments. Example: Your payment, excluding taxes  and insurance, would be about $770 on a $100,000 loan at 8.5%; if the  rate were lowered to 7.5%, your payment would then be $700, now you're  saving $70 per month. Your savings depends on your income, budget, loan  amount, and interest rate changes. Your trusted lender can help you  calculate your options.

Question 2

Should I refinance if I plan on moving soon?

Accepted Answer

Most lenders charge fees to refinance a loan. So, if you plan to only  stay in the property for a couple of years, your monthly savings may not  accumulate to recoup these costs. Example: A lender charged $1,000 to  refinance your loan that resulted in saving you $50 each month; it would  take 20-months to recoup your initial costs. Some lenders will charge a  slightly higher than average interest rate on refinance loans, but will  waive all costs associated with the loan. This will depend on the  interest rate on your current loan.

Question 3

How much will it cost me to refinance?

Accepted Answer

Starting with an application fee for $250 - $350, you may need to pay an  origination fee typically 1% of your loan amount. In most cases you  will pay the same costs you had with your current home loan for the  title search, title insurance, lender fees, etc. The total sum could  cost up to 2-3% of the loan amount. If you don’t have the funds to pay  for associated loan costs, you can search for lenders that offer  "no-cost" loans which will charge a slightly higher interest rate.

Question 4

What are points?

Accepted Answer

A point is a percentage of the loan amount, or 1-point = 1% of the loan,  so one point on a $100,000 loan is $1,000. Points are costs that need  to be paid to a lender to get mortgage financing under specified terms.  Discount points are fees used to lower the interest rate on a mortgage  loan by paying some of this interest up-front. Lenders may refer to  costs in terms of basic points in hundredths of a percent, 100 basis  points = 1 point, or 1% of the loan amount.

Question 5

Should I pay points to lower my interest rate?

Accepted Answer

Yes, if you plan to stay in the property for a least a few years. Paying  discount points to lower the loan's interest rate is a good way to  lower your required monthly loan payment, and possibly increase the loan  amount that you can afford to borrow. However, if you plan to stay in  the property for only a year or two, your monthly savings may not be  enough to recoup the cost of the discount points that you paid up-front.

Question 6

What does it mean to lock the interest rate?

Accepted Answer

Mortgage rates can change from the day you apply for a loan to the day  you close the transaction. If interest rates rise sharply during the  application process it can increase the borrower’s mortgage payment  unexpectedly. Therefore, a lender can allow the borrower to "lock-in"  the loan’s interest rate guaranteeing that rate for a specified time  period, often 30-60 days, sometimes for a fee.

Question 7

Should I lock in my loan rate?

Accepted Answer

It's unsure how interest rates will move at any given time, but your  lender may estimate where interest rates are headed. If interest rates  are expected to be volatile in the near future, considering locking your  interest rate may be good because it allows you to qualify for the  loan. Or, if your budget could handle a higher loan payment, or lender's  lock fees, you may want to let interest rates "float" until the loan  closing.

Question 8

I’ve had credit problems in the past. Does this impact my chances of getting a home loan?

Accepted Answer

Even with poor credit getting a home loan is still possible. A lender  will consider you to be a risky borrower and to compensate for this they  will charge you a higher interest rate, and expect a higher down  payment usually 20%-50%. The worse your credit history is, the more you  can expect to pay.

Question 9

I’ve only been late a coulpe of times on my credit card bills. Does this mean I will have to pay an extremely high interest rate?

Accepted Answer

Not necessarily, if you've been late with your payments less than  3-times in the past year, and the payments were no more than 30-days  late, you still have a good change at getting a competitive interest  rate. Most lenders will accept certain reasons for this like an illness,  or job-change, but explanations are required.

Question 10

Should I choose the lender with lowest interest rate and costs?

Accepted Answer

There are two important things to consider when choosing one lender over another one:
 • Quality of Service – Especially for  first-time homebuyers who will have many questions about the total  financing process and available loan options. Finding a lender with  outstanding service skills that you trust will comfortably guide you  every step of the way, so ask questions, even before you fill-out an  application.

• Cost of Services – It’s good to ask  potential lenders upfront what they charge for their services and any  fees involved. They should be able to give you facts and get you through  the financing process so that you feel confident knowing that you made a  good decision by choosing them.

Mortgage Basics
Refinance

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Mortgage Basics Refinance

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Mortgage Basics
Refinance