Benefits of a Mortgage Refinance
Deciding to refinance a mortgage offers several potential benefits:
- You can lower the interest rate. Doing so should reduce your monthly payment amount.
- You can shorten the loan term. For example, you can switch from a 30-year, fixed-rate loan to a 15-year, fixed-rate loan to save money on total interest payments.
- You can create more certainty. If you currently have an ARM or a mortgage with a variable interest rate, you can switch to the certainty of a fixed interest rate.
- You can take out a loan. If you have equity in your home, you might refinance the mortgage and take out some of the equity to use for home remodeling or other purposes.
Where to do a Mortgage Refinance
Many banks can do mortgage loans and there are literally thousands of mortgage brokers that can assist finding the best loan product for your needs. Mortgage brokers will often have a broader choice of loan products. First as a borrower determining if Conventional loans or Non-Conventional loans, sometimes this is quickly determined with answers to these two questions.
- How does your credit profile look ? What is your FICO Credit Score and pay history
- What is the equity in your home?
I use these two check questions for simplicity, of course there is more to it but when you visit a lender or broker you can delve into details. Your credit profile is evidenced immediately by your FICO Credit Score, from 300-800, the higher the number the better for the borrower indicating less risk for the lender. Conventional loan products will usually require a minimum 640 FICO score, sometimes down to 620 but the lower the FICO score the higher the interest rate and the more equity the lender will want in the home. Most Conventional loan refinance will require Loan to Value (LTV) of 80% for a cashout mortgage refinance. If you fall in this credit range and have limited equity position then a FHA loan may be a better fit for the simple reason of qualifying for a loan. For a FHA Mortgage Refinance cashout FHA will want a LTV of 85%. According to 2016 FHA Guidelines the minimum FICO Score can be 58o. FHA also offers a FHA has a Streamline Refinance that does not consider credit FICO score but the borrower must be current on their current FHA mortgage with no late payments for at least 12 months and be employed. There are a few curves when considering the right mortgage refinance but it really isn’t that complicated, a mortgage broker can very helpful maneuvering through the twists and turns. One other disclaimer is although FHA will allow a FICO of 580 most banks have overlays. Overlays are additional restrictions above the minimum guideline and is perfectly legal. However, the Larry Stepp Team do not have any overlays and can get you qualified with no overlays.
Reasons why a Mortgage Refinance is denied
Lenders might deny your mortgage refinancing application for many reasons, including the following: