Although interest rates on 30 year US mortgages fell below 4% for the first time recently, millions of homeowners may or may not be able to take advantage rates being offered. Deciding when to refinance your mortgage isn’t as simple as it once was. How much money will you save to refinance is no longer the primary question to be answered. Homeowners are discovering the real value in their homes.
Millions of Americans owe more on their existing mortgage than what their home is worth. Essentially, homeowners are locked into existing mortgages because of their homes value. This prevents them from refinancing to lower their monthly mortgage payment. Further complicating the refinance procedure are tighter lending standards and high unemployment.
Still all is not lost for those willing to make an effort to secure a lower interest rate mortgage. We would suggest talking to someone to find out exactly what your situation is and how to best proceed. Mortgage rates are not expected to climb and those who qualify should not let this opportunity pass them by.
“It’s hard to imagine how long-term, 30-year fixed-rate mortgages could go lower than they are right now,” said Frank Nothaft, chief economist of Freddie Mac. “These are the cheapest rates we’ve ever seen.”
Providing Necessary Documentation for Refinancing
In this economy be prepared to provide prospective mortgage lenders with more documentation about your income, credit history, and employment history. The days of signing your name and receiving a mortgage are long gone. Despite the low rates being offered today and advertised, mortgage applications continue to fall. Your debt to income ratio will be an important component of whether or not you are in position to refinance your mortgage. Unfortunately there is not a lot of wiggle room here. Seemingly lenders are simply laying a template over your financial situation and if you qualify then they will move forward. Still you will find some lenders who are willing to process your application despite a glitch in your credit history or a bump in your employment history provided you are able to document why these situations occurred.
Refinance Lender Comparison
Whether a homeowner is going through the refinance process for the first or tenth time, refinance lender comparison shopping is essential to getting the best interest rates and terms. It is very easy to get lazy and return to the lender who holds the original mortgage or a lender who has handled a refinance before, but this is a mistake. It takes a lot of work and consideration on the part of the homeowner to get the best refinance deal.
When considering a refinance it is important for a homeowner to contact numerous lenders to receive rate quotes. Quotes are the best way to determine what deal is the most beneficial and should be most highly considered. When looking around for quotes it is wise for homeowners to stick to lenders that are well established or that are well known and reputable. Working with newer, non-established lenders is risky.
Refinancing is a big financial decision and lenders that have already proven trustworthy are the safest bet. For homeowners who insist on investigating smaller, newer lenders should turn to family or friends for recommendations first. Any further investigating should be done carefully and from trusted resources.
One great way to ensure that the best rates and terms are being offered is to incite a spirit of competition with the lenders that are being considered. Most homeowners would hesitate to mention that they are shopping around for the best refinancing offer, but in fact it can be the most helpful method of comparison shopping.
Shop Around
If a homeowner casually informs the lender that they are shopping around a bit for quotes and won’t be making a quick decision then the lender knows there is competition. This means that they are more likely to open the discussion with better interest rates and better refinance terms. Refinancing is a competitive business and stimulating a little competition can only work in the consumer’s favor.
The homeowner always has the ability to decline this first offer if it is not the most favorable for them and chances are that the lender will offer something better. Even if they do not then looking at the other quotes is always the next best choice. During these consultations is also a good time to figure out other needs from a lender. For example if they address problems immediately and answer questions tactfully. These things are important to consider in comparison shopping and trying to decide if should you refinance your home mortgage.
Getting referrals can be one of the best and most reliable ways of finding a good lender for a refinance. Family and friends who have refinanced their homes are one of the best resources any homeowner can have. They will be able to give you a complete and honest overview of the lender they chose. If the experience was a positive one then they can point someone in the direction of a trustworthy lender who is offering great terms. If their experience was a bad one then it would be a good idea to avoid these lenders or at least to do a little more research on the company. Not only can you get an overview of the process itself but also any particular concerns can be addressed by someone who has already been through the process. This kind of input can be invaluable to choosing refinance lenders.
A good lender should be responsive to all requests and questions and do their best to satisfy their customer’s needs. Calls should be answered or returned in a timely manner and the most accurate information should be given up front. Consumers should trust their instincts when choosing a lender. If there is not a feeling of trust with a certain lender then perhaps it would be better to look elsewhere. Honesty and trust is a hugely important aspect to choosing a lender since they are being entrusted with a huge financial undertaking. If a homeowner’s first impression is not one of a knowledgeable and trustworthy company than it might be better to take a slightly worse rate with a company that gives that impression.
Conclusions
Finally, don’t count on receiving the lowest published rates. Only a small percentage of borrowers actually ever receive those published rates. You should consider closing costs as part of your evaluation process. Using real estate agents to evaluate the real value of your home will help you when it comes to appraisal fees. Eventually you will have to pay for a real appraisal, however getting a rough estimate of where you are financially with your home is a good idea. You may find it necessary to consider a cash in refinance mortgage. That means adding a significant amount of money to help qualify for your refinance. Use caution here and be certain that your home will further decrease in value or the amount of money you invest to qualify for a mortgage may be lost.
