Working With Mortgage Refinance Companies

Today’s refinance rates are extremely low which means as a homeowner, if you want to refinance now is the time to do it. Refinancing your mortgage can help you save money by reducing the interest rate, the mortgage payment, and basically adjusting the overall terms of the mortgage to better suit your needs. However, in order to refinance you do have to find mortgage refinance companies willing and able to work with you. Not all of these companies are able to work with every homeowner, however. The company you choose will be determined largely by your financial situation. Before you go to refinance, there are a few things you need to know that may help you find the company best suited to you.

Conventional Lenders

FHA LoansIn the real estate market that are many mortgage refinance companies, but all of these companies basically fall under two categories. The first is the conventional category and the second is FHA. Conventional lenders follow the underwriting guidelines established by Freddie Mac and Fannie Mae, two companies that have a major impact in the real estate market. The mortgage companies that follow these guidelines typically work best with homeowners who have good credit and good financial histories. There are definitely cases where people are able to get loans and refinances through conventional sources despite the fact that the person has imperfect credit. Typically when this occurs the individual is approved at a higher interest rate than he would have been if he had better credit or if he had gone through a different source.

The reason conventional companies are less willing to work with individuals who are dealing with imperfect finances is simply because when they approve a loan, they take on a certain amount of risk. The homeowner is given hundreds of thousands of dollars to purchase the home, and then he has to pay it back over a thirty year period. If the homeowner defaults, that money is lost and the company ends up forcing a foreclosure, a situation that nobody wants. By approving people who are able to show that they have taken care of their finances, the conventional companies tend to lower their risk; they are willing to work more closely with these homeowners to ensure their business remains.

FHA Mortgage Refinance Companies

The second category of mortgage loans and mortgage refinance companies is the FHA category. Started during the Great Depression, the Federal Housing Administration gives people the ability to purchase a home even if they have poor credit and a blighted financial history. Federally approved lending companies work closely with individuals dealing with credit scores as low as 500. While the interest rates can go up depending on the score, most of the time the rates are competitive with the current market rates. These companies are able to offer these deals because they don’t carry all of the risk themselves, unlike conventional sources. In addition to this, they follow the underwriting guidelines established by the government for this administration. When a federally approved company approves a loan, that loan is insured by the Federal Housing Administration. Regardless of what happens with that loan, the company is going to at least get the money back that was invested in the homeowner.

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Federal sources are best used by individuals who have low credit scores or who are in the middle of repairing finances that have fallen apart. For example, people that have had previous foreclosures and bankruptcy can apply for a loan within two to three years after the completion of the bankruptcy; with conventional sources, that wait is much longer.

In addition to this, there are federal refinances that have been offered by the Obama administration that address the growing problem of homeowners who are underwater on their mortgages. These are the short refinance and HARP. Both of them make it possible for homeowners to refinance even if they have little or no equity in the home, and qualifications are not difficult to meet. However, with these refinances you need to work very closely with your mortgage company to ensure a successful outcome.

As a homeowner what you need to do is look closely at your financial situation before you head off to find a mortgage company willing to refinance your loan. By determining what your credit score is and getting a clear picture of your finances, you will be able to find those companies that will be willing to work with you. You can always get quotes from companies on both sides of the spectrum, but remember that they are quoting you based on your credit score and financial history; they will all reflect what they believe your risk to be.

Picking your lender can be a bit tough. Here is a good place to learn more about mortgage refinance companies.