With interest rates being at very low rates right now, many people are wondering how they can get a refinance to take advantage of these low rates all the while knowing that credit it tight with lenders.
To start with, having a high credit score in this market is pretty much required in this market. Lenders are no longer willing to take the risk that they took two-three years ago. If you have this, the first major hurdle is now out of your way.
Many people are looking to get out of their adjustable rate loan for a fixed rate loan for the life of the loan. At the time of origination of the original loan, many loans had a five year fix rate and then went to adjustable after the fifth year (commonly known as a five-year arm). Also, with this arm, many loans were broken into two loans. A primary loan and secondary loan. This would have lowered the interest rate to avoid “jumbo loans”, which have higher interest rates and require better than average credit.
In today’s market, it’s probably best to see if you can do the refinancing with your original lender. Check to see what they can offer you as far as rate, type of loan or loans, or mortgages. Shopping around online can also be a good source; however you may run into some very sticky situations buy doing this. Each lender you shop will access your credit. After three inquires on your credit history, your credit score will start to drop for each inquiry. Also, if you have your mortgage and an equity line of credit or equity loan, many lenders are not willing to let another company to the refinancing. This is because of resubordination. This means that they give up the first postion to be paid in the event of foreclosure or default. Lenders are still doing this, but to get a decision will take a lot longer now, most running 30-45 days. The application process and be long as well, since now refinancing more than 80% of the homes value is considered a “bad loan”. In comparison, your best bet is to try and refinance with your existing lender or Mortgage Company for easy access to fixed rates or low rates.
Being a well informed consumer with knowledge about your credit score, knowing what type of loan or loans you will need is getting the best jump start to this market. Having a preliminary home appraisal to find out just how much your home is worth is also to your best interest. These appraisals can run anywhere from $100-$400. If you choose this as an option, I would suggest contacting your local branch of the bank you deal with the most to find out who they use to do property appraisals. There are also many online programs which you give you an approximated value of your home, but these are not as accurate as getting a true professional appraiser to do the inspection. The online values are obtained by local tax records, which can be incorrect.
In the end, knowledge is power. So obtain as much knowledge as possible and you can possibly be in the driver’s seat when it comes to your loan.