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Refinance: Things To Consider And Things Considered.

Factors in Getting a Refinance

A refinance is a loan that is created on an asset that is already owned by the borrower. Many times the homeowner will do this in order to get a lower interest rate or in order to pull money out to cover other bills. A refinance, while sometimes easier to qualify for, is a loan that requires a few simple factors in order to obtain.

Credit Rating

Credit rating or FICO score is one of the biggest factors considered when getting traditional lending. During recent years credit guidelines have become more and more stringent, however someone does not have to have exceptional credit to obtain a loan. Most loans require a score that, depending on the time and other factors, hovers around 620. The credit rating is one of the most important things to be considered by lenders when getting lending.

Mortgage Payment History

Mortgage payments are also taken into consideration when getting a refinance. Even if someone has a high credit score, but has a history of making mortgage payments late, the chances of getting a refinance are diminished. The lender rationalizes that past behavior will predict future actions for a buyer. If a buyer makes payments time with their current loan, then they will most likely continue doing so. Making payments on time is one of the most important actions a homeowner can make when preparing to get a refinance.

Percentage Complete

The amount of time a homeowner has had a mortgage is also a factor that is taken into consideration when getting a refinance. The minimum that lenders look for is typically 12 months, but sometimes it can also be done sooner. The longer a loan has been in place, the easier it is for a homeowner to get a refinance. The longer a loan has been in place, the more equity pay down a homeowner typically has in their property.

There are many other factors that are taken into consideration when getting a refinance such as job history, assets, income, ability to repay, or other debt.

Before applying for a refinance… these are some things that you may want to put in order!

* Residence address (past two years)
* Social Security numbers
* Names, Locations, and phone numbers of employer (past two years)
* Gross monthly salary at your current job(s)
* Information for all checking and savings accounts
* Information for all open loans
* Information for the property that you are getting a refinance for
* Approximate value of all personal property
* Information on any other real property owned
* Certificate of Eligibility and DD-214 (for veterans only)
* Current check stubs and your W-2 forms (past two years)
* Personal tax returns (past two years), current income statement and business balance sheet for self-employed individuals

You will also need to acquire a recent mortgage statement and appraisal for the property getting a refinance.
There are many factors to be aware of when getting a Refinance

There always has to be justification in getting a new loan. Good reasons may include the need for a lower interest rate or more favorable terms. If a homeowner can get a refinance, they can capitalize on current low interest rates which could lower their payment up to a couple hundred dollars a month. Whatever it is, make sure the loan will save you money, and more importantly, make sure you can afford the new payments.

Watch the terms of your new loan

Not every refinance loan is the same. Some have 15 year terms while others have 30 year terms. Some have lower payments upfront and then can adjust while other loans are fixed for the life of the loan. If you will be getting a refinance loan, make sure the terms will be manageable for you.

Introductory Rates Can Be Misleading

Known as 'teaser rates', introductory rates can look good on paper, but can come back to 'bite' you later. Being drawn into a loan with introductory rates, you should have a clear understanding of when the rate will adjust, what the rate cap is, and what your payment might be at its highest. It is always safer to get a "fixed rate mortgage".

There is No Such Thing as a Free Loan

Don't be fooled by lenders who offer no closing cost refinance loans or home equity loans. Loans ALWAYS contain fees. If you don't pay the costs upfront, you will pay for them later on in the loan. While this may not seem so bad, you need to remember that you will also be paying interest on anything not paid upfront. Money always costs money!

Tax Assessment are not real indicators of value

If you are thinking about getting a refinance loan or home equity loan, don't assume that the local tax assessor's appraisal represents the real value of your property. Tax assessments aren't genuine appraisals. Your home may be worth quite a bit than the amount indicated on your tax assessment. The only way to find out how much your home is really worth is to get a certified appraisal.

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