5 Tips for Refinancing a Home
With how strict lenders have been in reviewing borrowers income, assets and financial history, we have heard many potential borrowers ask if lenders are still refinancing home loans? The answer in a nut shell is "Yes" but be prepared to provide more documentation than your last refinance. Some tips to keep in mind:
1) Prepare your financials ahead of time-Lenders want to see 1 full month of pay-stubs (30 days) to verify your salary including overtime, bonus and commissions. Having both your W-2's and tax returns available for the past two years is wise even if they have not been requested from the lender yet. Many banks are referring back to your tax returns 1106 Itemized Deductions to verify what expenses you have deducted and removing this from your income.
2) Create a Schedule of Real Estate if you own multiple properties-This will save time and questions from all parties involved down the road. A Schedule of Real Estate can be on a spreadsheet or simply written out in a Word Document but should contain the following: Property Address, mortgage balance, mortgage payments, lender(s), taxes/insurance and estimated value.
3) Credit Score-It's a good idea to pull a free credit report ahead of time. Annual Credit Report offers a one time free credit report every year. Click here to obtain. Once you review there will be no surprises when the lender pulls your report and receives your score. The lowest middle score of all borrowers is the one that lenders use to determine your interest rate.
4) Interest Rates-The market is volatile and changes every day. Unless a lender "locks" your loan, interest rates will continue to move. Ask your lender for a range of interest rates and compare with your current interest rate. Most homeowners want to save a minimum of 1% on the rate to recover the costs involved in the refinance. It's not a bad idea to consult your tax advisor on what points or fees might be deductible on your taxes. Most savy brokers can offer a range of interest rates from the lowest possible rate available to higher rates which may include a credit towards your closings costs. Always ask!
5) Appraised Value-Because banks currently use Short Sales/Foreclosures as comparables this can put a damper on your refinance dreams if values in your neighborhood have dropped. However, the HARP loan can assist especially since the cap is being removed, meaning even if your home is upside down by over 125% you may still be eligible. Lenders are awaiting programs details. Stay tuned!
Everyone has a different loan scenario, please do not hesitate to contact us with questions regarding home loans. We would be happy to assist you in finding the right fit.
