After seeing the rates hit the bottom, the job market and economy are slowly improving, and the government is devising new programs to assist homeowners. Now appears to be a good time to refinance your home. In theory, these factors would normally result in creating a home refinancing boom. But in the real world, locking a good deal locked is proving to be quite a challenge- even for prosperous homeowners. Tight lending standards and low appraisals are making it tough for borrowers to refinance, even though they have substantial assets and good credit ratings. Fortunately, there are some ways in which borrowers can overcome these hurdles.
Recapture the closing cost
If you want to refinance your home, you can better your chances of striking a good deal by shifting some assets to your lender, understanding new government programs, and cleaning up your credit. When rates drop substantially, homeowners can save a neat bundle if they go for refinance. Experts advise that if you can find a deal that is likely to recapture the closing costs within a period of 18 months, you should definitely go ahead. Many borrowers are not able to take the benefits of lower rates due to being underwater i.e. they owe more than what their homes are worth.
For a lot of people, refinancing a home is almost like a battle. Sometimes even self-employed borrowers and owners of multiple properties run into problems in spite of having substantial assets and good credit scores. Clogging of mortgage pipelines can result in an extended waiting period for completion of a refinance, sometimes 70 to 90 days.
Some lenders offer refinance to existing customers only while others do not entertain new borrowers, owing more than 105% of the value of their homes. For those who manage to clear the obstacles, low rates can offer incredible opportunities.
The following tips can help you make your way through the various obstacles:
Mend your credit – Before you start with the refinancing process, acquire a copy of your credit report and get to know the real value of your house. The value of your home can be calculated using various sites like Neighborhood IQ. These two reports will give you sufficient time to clear up your mistakes and put up your best side in the eligibility process. Borrowers with great credit scores are likely to land up with the best rates. High-income borrowers can also run into credit problems if they miss out on payments. In fact, they might be hit harder than a low income borrower with a low score because there is a lot more at stake. Also, borrowers who have chosen not to use too much credit can end up with a low credit score.
Reduce loan term – If your mortgage is several years old, you can increase your savings by choosing a new loan with a shorter tenure. Even if the new loan is at the same rate, you can get considerable savings over the entire life of the loan. With many borrowers looking to lower their debt, a large number of lenders offer a mortgage with shorter term.
Shop around – Even when rates are at never-before lows, the gap between the highest and lowest rates offered can sometimes be as much as a complete percentage point. With pipelines nearing their full capacity, some big lenders raise rates in an attempt to boost profits while keeping volumes down. There are various websites which allow borrowers to compare the rates of different lenders. Getting an estimate from more than one lender will put you in a better position to negotiate a deal.
Apart from these points, relationships can make a lot of difference. Banks, though cautious about home loans, are more flexible towards their better customers. Some borrowers are able to secure refinances from banks after making large deposits because this proves their ability to pay back.
A little research can mean an easy and pleasant refinancing experience while maximizing your money. Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm as well as match you with potential lenders! To assist you in the refinancing process, you can get a free home value report from Neighborhood IQ and find out what your home is really worth.