When should you refinance?

It used to be a general rule of thumb that a good time to refinance was when rates dropped 2% below your current rate. This way the cost of refinancing would be covered pretty quickly. But there is more to consider in refinancing than just a drop in market rates.

Your individual financial and life circumstances weigh in, too.

Refinancing: Financial and Life Circumstances

1. Your home's value has increased. While many home values have actually declined in recent years, it helps to be cognizant of the changes in your home’s value. With an increase in home value, you can use the equity to consolidate debt (to a lower interest rate) or to make home improvements. Additionally, if you were required to pay PMI (private mortgage insurance), an increase in your home’s value may eliminate the need for PMI if you refinance.
2. You have a change in cash flow. You’re earning more or you’ve paid off debts. A positive change in cash flow (which can happen if your income has recently increased or your non-mortgage debt like car loans, student loans, credit card balances, etc. has decreased, your debt-to-income ratio may have improved, which may qualify you for a lower interest rate for your mortgage.
3. You have an adjustable mortgage. Many homeowners have adjustable-rate mortgages (ARM) or interest-only mortgages. The risk with these loans is the possibility of an increase in monthly mortgage payments. Refinancing a mortgage to a traditional 30-year fixed-rate mortgage can provide stability in payments which aids in financial planning and budgeting.
4. Your credit history has improved. The best mortgage rates and loan terms are generally reserved for borrowers with the best credit scores. If your credit score is much better than it was when you first got your home loan, it's possible that you can now get approval for a mortgage with a more favorable rate. Be proactive! If you know your credit score has risen, you can obtain a copy of your credit report now to confirm your scores and to work on correcting any errors before applying.
5. You wish to shorten the life of your loan. If you’re in an adjustable rate mortgage or even a 30-yr fixed, with rates as low as they are right now, you could switch to a 15-year fixed loan to shorten the life of your loan without necessarily increasing your monthly payment by a substantial amount.

Refinancing: When Interest Rates Drop

Of course, a drop in average mortgage rates remains one big reason why homeowners want to refinance. Even if you already have a 30-year fixed-rate loan, if current interest rates are substantially lower than what you pay on your existing home loan, refinancing your home could save a lot of money over time. Or, as mentioned above, depending on the rate you have today, you could end up saving money over time by refinancing into a shorter term loan (ie: 15 year fixed).

Be sure to discuss all of your refinancing ideas and wishes with your mortgage broker or loan officer. If he/she has the full picture, it will help you get the best loan for your needs. A big part of the consideration for refinancing? The cost! To give you an idea on the cost of refinancing for you, use our Closing fees Quick Quote. If you know the rate you are shooting for to refinance, you don’t need to check rates every day, we’ll check them for you. Use our Rate Alert which will automatically email you when the rate you want is here!

Don’t miss out on the low rates being offered today. If in doubt about the benefit of refinancing, don’t hesitate to call your loan officer or mortgage broker.

Do you qualify for an FHA loan?

Are you, or is someone you know:
- a first-time home-buyer?
- looking to buy a home in need of repairs?
- looking to refinance an existing home that’s in need of repairs?
- looking to buy a home but is earning low-to-moderate income?

You may be a candidate for an FHA loan and if you are, chances are you could benefit.

Simply put, an FHA loan is a loan insured against default by the FHA (Federal Housing Administration). Why would the FHA insure loans for people to buy homes? Their goal is to promote home ownership. And they’ve made it easy -- the guidelines for qualifying are straightforward. And you will not be working with the FHA directly. Your mortgage broker or loan officer handles all of that for you.

Typically, FHA loans are designed for low-to-moderate income borrowers, including those with homes that may be located in disadvantaged neighborhoods or federal disaster areas, FHA loans can be a viable option for first-time borrowers and for borrowers seeking to refinance. Here are some features of these programs:

* Down payment as low as 3.5% of the sale price
* Maximum qualifying ratios 31/43% (these are your debt-to-income ratios)
* Fixed and adjustable-rate mortgages available
* Purchase, rate/term refinances, cash-out refinances and streamlined refinances

If any of the following situations match you, it’s worth the phone call to find out if you qualify for an FHA Loan:

* Have low-to-moderate income
* Live in a disadvantaged neighborhood
* Have a home or are interested in purchasing a property that needs repairs
* Lost their home in a federally declared disaster
* Are first-time homebuyers

You may or may not qualify or need an FHA loan. But if you do, it can give you important advantages. Consider a first-time homebuyer who may not have a great deal of money for a downpayment. An FHA loan may make the difference between qualifying for a home mortgage altogether since there’s a much smaller down payment requirement than there is with a conventional loan.

And there is no guarantee that these programs will be around for long! So if you think you may qualify or know of someone who didn’t qualify under a conventional loan program, call your mortgage broker or loan officer today.