Refi is just a short way of saying refinance. Refinancing is just like ordering pizza; you have a lot of choices. Some people like pineapple while others like anchovies. The fact of the matter is, that a certain option may not satisfy the craving. When it comes to refinancing, it’s important to select a choice that will clearly create a better future financial situation. Here are some major options to select when you refinance your home.
Start By Looking at a Conventional Refi Choice
This is always a good starting point especially if you have a quality amount of equity up to 20% and a credit score of 700 and above. A basic requirement to refinance your home is a positive record of mortgage payments up to a year. This shows your lender that you are responsible person and they will be more prone to let you borrow a certain amount because of your record. This would by why it’s so important to clear any delinquencies or errors in your credit. Remember, there’s a lot of paperwork to do especially in regards to your W-2 because everything in your record from cash gifts, receipts on payments, income, and job history will be requested from your lender.
Consider a HARP Loan if the Market Value of Your Home is Down
This is a great option if you have a Fannie Mae or Freddie Mac loan. Most lenders do not accept homeowners who have a loan to value over 80%. However, this loan makes the exception because of the level of need. Also, homeowners are not in a stressful situation like having to foreclose the property because of late or delinquent payments. They’ve kept a steady payment record in their mortgage, but may want to reduce the amount paid simply because the value of the home dropped recently. Lenders are more prone to allow those that meet the basic requirements of HARP to proceed in the program at a loan to value of 125%. This may even expand in the near future depending on Congress’ decision to move forward with opening up HARP to different loan types. Keep an eye on other refi situations.
Use FHA Streamline Refinance as an Alternative
If you are into choices, this is certainly a way to get your point across. When it comes to lowering your mortgage, this is by far a great method to choose. You don’t need a pesky appraiser to go by your house and tell you what’s wrong. You can bypass the repairs and save a ton of money. It’s much easier to apply for this refinance and get approval and there is less responsibility on your end because you cannot receive a cash sum from equity. Also, the lender won’t have to worry about actually loaning you money. Research the interest rates on your mortgage as a result of taking a lower payment. See how federal streamline refinance affects your overall balance by speaking with a federal streamline specialist— they will help make your decision easier.
Create More Options Through a Federal Cash Out Refinance
There’s a lot more responsibility from this end of the spectrum. Do you have a lot of equity in your home? You can actually use this to fund or pay off other bills. However, you’ll need to take care of a few things before you proceed. First of all, a lender will request that you get an appraisal. Before you can utilize equity, they have to make sure that your home is livable by federal government standards. This is to make sure home is safe and everything works in proper order. An appraiser will be sent to your home to do a spot check on your property and see if all your major appliances are up to date. If there are any items that just don’t match up to the status quo, you may need repairs or updates. Of course, this means more money out of your pocket. However, it may be a good investment because it may increase the market value of your home even further. Also, you have a plethora of options as to how to spend the money from a cash out refi. You can use the equity to pay off your student bills, car expenses, or fund a vacation. It’s also a great idea to use the equity to create an emergency fund– you never know if you need to save your money for a rainy day.
It’s important to discuss with lenders the different refi choices. This way you have a better opportunity to be successful with refinancing. Open your eye to different possibilities but keep in mind that you have to deal with the rates, fees, and regulations at the end of the day.