A Note From Aubrey Ford, Our Client Relations Manager
As interest rates have taken another fall, we’ve once again started hearing ads for low home-loan interest rates. Many use the angle that “this is the time to take advantage of these historically low rates, since they won’t last for long.” Although advertised rates are usually attractive, you need to consider many options before going down the refinance rabbit hole. Often, the teaser rates you see are just that — a teaser, designed to get you to hand over your information and start the sales cycle. Also, not all lenders keep your information private, and will sell your information to service providers. If you do fill in an online questionnaire, be ready to start hitting the unsubscribe button. Pay attention to any disclosures. Is it a rate for a VA (Veterans Administration) loan, or do they state that the rate is with points (money a borrower pays up front to lower the interest rate, also know as buying down the rate)? Even if not, there are still plenty of hurdles to consider.
Here is a short list of some of the required qualifications to get the advertised rate.
- Low loan-to-value (LTV) on the property
- Conforming loan amount (varies by state)
- No cash out
- 740+ FICO score
- Primary residence
- Good, stable, and increasing income from a regular source
- No bankruptcies or charge-offs
There are many reasons you may want to refinance your home loan: moving to a fixed rate from an adjustable; lowering your monthly payment; or shortening the term. No matter what the reason, remember there is a cost to refinance and even using a lender that advertises no closing costs you will still need to come out of pocket for the appraisal, escrow, title, and notary. All of this will cost some money, so before signing on the dotted line, be sure to consider how long it will take you to recoup the cost, and ask yourself if it still makes sense.
Mortgage lenders need to disclose everything by law. Review the forms they give you and read what your sign! The “Good Faith Estimate” is one of the first documents in your loan package; read it, and understand what you are buying. If something doesn’t line up, don’t think the bank made a mistake; they probably did not.
An Update On the Cares Act And How It Relates To Mortgage Forbearance
Approximately 4.1 million home owners are still in forbearance as of July 15th. It used to be that you had to make 12 monthly on-time payments before you could refinance after being in forbearance. That is no longer the case. Now you only need to make three monthly on-time payments to be eligible to refinance, but it would still be a good idea to communicate your previous forbearance to your new lender.
