Popular Refi Programs for Homeowners with Equity

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Interest rates have been hovering near all-time lows for weeks now, and many people are watching reports on both how low rates are as well as “new” refinancing programs such as the HARP refinance for underwater borrowers.

But what if you don’t currently owe more on your mortgage than your house is worth? Can you still refinance?

Of course!

In fact, in many circumstances it will actually be easier to refinance if you have equity in your home.
When considering refinancing, the first step is to identify your goal. Do you just want a lower monthly payment? Do you want to get cash in exchange for some of the equity you have built up in your home?

Once you have identified your goal, the second step is to learn more about the refinance program that will best match your needs.

Conventional refinance
If your loan is backed by Fannie Mae or Freddie Mac, it is considered a “conventional” loan. Refinancing a conventional loan is the most common refinance option. Highlights of conventional refinance programs include:

• Appraisal required
• Full employment and income verification
• Employment history of two years
• 620 credit score
• Popular to go from 30-year term to 15-year term
• 95 percent loan-to-value with mortgage insurance, 80 percent without
• Lender credit allowed to cover closing costs

FHA streamline refinance
The FHA streamline refinance program is designed for people who currently have a Federal Housing Administration (FHA) loan and just want to lower their monthly payments. If you have done an FHA streamline refinance in the past, you may still be eligible to do another FHA streamline as long as it benefits you financially. Highlights of the FHA streamline program include:

• No appraisal required
• No income verification
• No credit score verification required by HUD, but payment history will be considered
• Low fixed rates
• Lender credit allowed to cover closing costs

VA streamline refinance
The VA streamline refinance is a popular program for veterans or active-duty military personnel who have a Veterans Affairs loan. Similar to the FHA streamline, the VA streamline is designed for people who want to lower their monthly mortgage payment without getting cash out. Highlights of the VA streamline program include:

• No appraisal required
• No income verification
• No credit score verification required by HUD, but some lenders may set minimum score requirements
• Low fixed rates
• Reduced funding fee requirement (0.5 percent)
• Lender credit allowed to cover closing costs

Cash-out refinance
In the event that you want to convert part of your home’s equity to cash, there are programs called “cash-out” refinance programs. FHA, VA and conventional loans all have different cash-out refinance requirements, but generally speaking, here are some highlights of what to expect:

• Appraisal required
• Full income and employment verification
• 620 credit score
• 85 percent loan-to-value for FHA; 80 percent for conventional; 100 percent for VA
• Lender credit allowed to cover closing costs

While rates are low, it will often make sense to refinance — whether you want to get cash out of the equity of your home or just lower your monthly mortgage payment.  In each of the above scenarios, one thing sticks out regardless of which program you’re interested in: "Lender credit allowed to cover closing costs."

Let your lender pick up the tab for you!

via yahoo homes

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The Secret to Getting a Mortgage or Refi Rate Near 3%

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The headlines are buzzing: Mortgage interest rates have dropped to 3.875 percent for a 30-year fixed rate loan. Want a 15-year loan? You'll pay even less, maybe 3.25 percent.

Can you get a 3.875 percent interest rate? First, you have to understand that not every lender offers a loan carrying a super-low interest rate, and only people with the best credit need apply.

But there's more to the story. If you want to land the best loan with the best rate and terms, you'll need two things: credit and cash.

Your Credit
Many borrowers don't understand the direct link between your credit and your loan. The better your credit history and the higher your credit score, the lower your interest rate and the better your terms.
If you've missed some payments – or even if you're only 30 days late on one bill – your credit history is tarnished, your credit score reduced, and your interest rate will be far higher.

Your Cash Outlay
But don't forget about cash. These days, lenders want to see you walk through the door with at least 20 percent to put down on the property. If you don't have at least 20 percent equity (if you're refinancing) or 20 percent in cash for your down payment, your interest rate will be higher.

For example, if your credit score is 760 to 850 and you have at least 20 percent equity, you're in the highest credit tier, which means you might qualify for an interest rate at 3.282 percent on a 30-year fixed rate loan or less than 3 percent on a 15-year fixed rate mortgage.

But if your credit score drops into the second-highest tier (700 to 759), you might only qualify for a 30-year loan at 3.504 percent. To be sure, a loan at 3.5 is still a historically amazing rate. In fact, today's interest rates are so low that you might qualify for a loan below 4 percent even if your credit score is a 660. But you may need to have as much as 50 percent in equity or for your cash down payment.

The right lender
The key to finding a great loan with a terrific interest rate is finding the right mortgage lender to give it to you. But here's where it gets a little sticky. There are plenty of lenders who don't want your business. They might be overweighted with bad real estate loans, or they might not need any loans from people with less than perfect credit scores, even if you have plenty of equity in the property.

But instead of telling you they don't want your business, they'll just quote you an interest rate or loan terms that are, shall we say, less than palatable. By comparison, these quotes will look downright expensive.

Of course, if you don't shop around for a lender, you won't know that you're being quoted an interest rate that's too high or offered a loan program that doesn't make sense for your finances. So talk to a variety of lenders and make sure you understand exactly what you need to do to close on a loan that offers an interest rate for less than 4 percent.

via yahoo homes

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FHA Streamline Refinance

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FHA Streamline Refinance FHA has permitted streamline refinances on insured mortgages since the early 1980s. “Streamline refinance” refers only to the amount of documentation and underwriting that the lender must perform, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:

• The mortgage to be refinanced must already be FHA insured
• The mortgage to be refinanced should be current (not delinquent)
• The refinance results in a lowering of the borrower's monthly principal and interest payments, or, under certain circumstances, the conversion of an adjustable rate mortgage (ARM) to a fixed-rate mortgage
• No cash may be taken out on mortgages refinanced using the streamline refinance process.

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