Refinancing

Lowering the rate 

The mortgage interest rate that you’ve been paying may be higher than what’s available on the current market, so it may make sense refinancing to a new low rate. If you’ve recently improved your credit score and financial situation, refinancing may be the right move because you’ll be able to snare a better rate. It will reduce your monthly payment, and could lower your total interest costs.

Building equity more quickly

In certain scenarios, a higher monthly mortgage payment can have financial benefits. The higher payment allows you to build equity and reduce debt faster. The combination of higher equity and lower debt adds stability to your overall financial picture. You can achieve this goal by restructuring your home loan into a shorter maturity. The traditional choice is a 15-year mortgage, because they have slightly lower interest rates than 30-year loans. Your monthly payment would still be higher because you’d be paying the debt off over a shorter period of time, but your total interest costs would be substantially lower. 

Raising cash

Cash-out refinancing is a viable option when you need money to purchase a long-term asset. Examples are home renovations, a college degree, and real estate property. Cash-out refinancing doesn't make sense for vacations, clothes, and cars.

Lowering your risk

Refinancing to fixed-rate mortgages can reduce risk if you currently have a balloon payment loans or adjustable-rate mortgages (ARM). Today’s low inflation level may make your ARM seem pretty attractive, but there’s no telling what could happen in a few years. Balloon payments are scary because you can’t predict what the lending environment will be like when your big payment comes due.

Consolidating debt

If you have two mortgages, consider consolidating them into one with mortgage refinancing. Your goal is to have an overall lower interest rate and payment, assuming that you have at least 20 percent equity in your home.

Refinancing is a good way to build equity faster, finance a long-term asset, and to lower your rate, your overall interest costs, or your risk. These could all be considered “right” reasons. However, which one is the right reason for you and what is the best way to do it? Call one of our refinancing specialists in order to pinpoint where you should be heading next!

Common Refinance Mistakes

There are lots of facts to focus on when you’re shopping for a mortgage refinance. If you overlook some key points, though, you may be making the same mistakes as many mortgage shoppers before you. You can avoid getting caught in traps now that could have negative consequences later by knowing what these potential pitfalls are and avoiding them.

Control your cash-out

In the recent past, the cash-out mortgage refinance, where homeowners borrowed extra money when they did a mortgage refinance, was all the rage. Unfortunately, that type of borrowing got many people into serious financial trouble when housing values dropped, and they found themselves underwater on their mortgages.

Know your break-even period

If you’re going to refinance, it’s going to cost you. It may feel like first mortgage déjà vu, because you’ll be required to pay closing costs again, including fees for appraisals, credit checks, title insurance, application, and points, to name a few.

Appraisal shock

The ultimate determination of whether you’ll qualify for a mortgage refinance or not will depend partly on your appraisal, especially if you’re in an area where real estate values have dropped. Prepare yourself by checking with a local realtor, and asking for a list of recent properties that have sold that are comparable to yours. This will give you some idea of how much your home is currently worth. Before the appraiser comes, fix any obvious problems that may be an eyesore, like broken windows or messy landscaping.
As the old saying goes, “Fool me once, shame on you…fool me twice, shame on me.” The above traps have fooled many borrowers. Now that you know them, you can easily avoid them, and your mortgage refinance will definitely give you the benefits that led you to do it in the first place. Want to find out about more pitfalls in the refinancing world? Give First Option Mortgage a call to find out how easy and safe a refinance can be.

Home Refinance Checklist

Home refinancing has become vastly more difficult in the aftermath of the economic crisis. Mortgage lenders have developed a renewed passion for verifying the minute details of prospective borrowers’ financial situations. If there’s a refinance in your immediate future, expect your lender to double and triple-check your credit qualifications. This can be a tedious process, but you can help things along by getting your documentation together in advance. Refinance lenders focus their verification efforts on three areas of your financial picture: your income, your assets, and your debts.

Income verification

•    Two months or more of your most recent pay stubs if you’re employed; a current profit and loss statement if you’re self-employed
•    Two years or more of your most recent W-2s if you’re employed; two years of recent tax returns if you’re self-employed
•    Documentation of other income that will be used to calculate your ability to pay, including Social Security payments, child support, or alimony

Asset verification

•    The three most recent monthly statements of all bank accounts, pension plans, 401(k)s, IRAs, and brokerage accounts
•    Proof of homeowner insurance on the property being refinanced
•    Property deeds

Debt verification

Your lender can verify some of your obligations by pulling your credit report, but that may not reflect the most recent changes in your account. It’s particularly important to be prepared with paperwork if you have recently paid off any debt balances. Our credit repair department can also help you in establishing credit and paying off creditors. Also, since you’re refinancing, you’ll need to authenticate the terms of your existing mortgage loan. The documents you’ll need are:

•    Recent statements for credit cards, your existing mortgage, and student, auto, and any personal loans
•    Loan agreement and the note associated with your current mortgage
•    Divorce paperwork if you’re obligated to pay child support and/or alimony

This checklist of required documentation may be the complete list, but it does prepare you for what lies ahead. There are several stresses in life that require a lot of preparation. A mortgage refinance is no exception. To find out how to make your refinance go as smoothly as possible and to lock the lowest rate today, give First Option a call!

Five Reasons to Refinance Your Home

Lowering the rate 

The mortgage interest rate that you’ve been paying may be higher than what’s available on the current market, so it may make sense to refinance to a new low rate. If you’ve recently improved your credit score and financial situation, a refinance may be the right move because you’ll be able to snare a better rate. It will reduce your monthly payment, and could lower your total interest costs.

Building equity more quickly

In certain scenarios, a higher monthly mortgage payment can have financial benefits. The higher payment allows you to build equity and reduce debt faster. The combination of higher equity and lower debt adds stability to your overall financial picture. You can achieve this goal by restructuring your home loan into a shorter maturity. The traditional choice is a 15-year mortgage, because they have slightly lower interest rates than 30-year loans. Your monthly payment would still be higher because you’d be paying the debt off over a shorter period of time, but your total interest costs would be substantially lower. 

Raising cash

A cash-out refinance is a viable option when you need money to purchase a long-term asset. Examples are home renovations, a college degree, and real estate property. Cash-out refinances don’t make sense for vacations, clothes, and cars.

Lowering your risk

Refinancing to a fixed-rate mortgage can reduce risk if you currently have a balloon payment loan or adjustable-rate mortgage (ARM). Today’s low inflation level may make your ARM seem pretty attractive, but there’s no telling what could happen in a few years. Balloon payments are scary because you can’t predict what the lending environment will be like when your big payment comes due.

Consolidating debt

If you have two mortgages, consider consolidating them into one with a mortgage refinance. Your goal is to have an overall lower interest rate and payment, assuming that you have at least 20 percent equity in your home.

Refinancing is a good way to build equity faster, finance a long-term asset, and to lower your rate, your overall interest costs, or your risk. These could all be considered “right” reasons. However, which one is the right reason for you and what is the best way to do it? Call one of our refinance specialists in order to pinpoint where you should be heading next!

The Cash-In Refinance

You've heard of the cash-out refinance. That's when the new mortgage is for a bigger amount than the old loan. The homeowner receives a check for the difference at closing. In a cash-in refinance, the refinanced mortgage is for a smaller amount than the old loan. The homeowner takes a check to the closing.

Why would you do this you ask? There are four major reasons why this is a logical choice for borrowers:

1. Getting the best mortgage rate – Also if you are underwater on your mortgage, you may not qualify for the refinance. Bringing money to the table can change that.
2. Eliminating PMI (Private Mortgage Insurance)
3. Avoiding a jumbo loan (loans generally between $417,000 and $729,750)
4. Shortening your loan term with reasonable monthly payments

These reasons and several more are making the cash-in refinance much more attractive to borrowers who are attempting to soften the blow to their monthly cash flow.

Would you like to find out if this is your best option? Want to know how much you need to bring and what fantastic changes that means for you? Give one of our refinance specialists a call to find out today!

Is the Term of Your Refinance Important?

There are many terms to describe the process of refinancing your home. Cumbersome and stressful are two that come to mind. However, there is another type of term that you should focus on, the one that determines when you’ll finally be debt-free.

When refinancing your mortgage, don’t ignore your new loan’s term. Homeowners tend to focus on interest rates, points, and loan amounts, and forget to consider whether the standard 30 year term is really their best choice. Most of the time, it’s not. Assuming that you don’t refinance annually, you’ve already paid at least a year or two of interest on your current mortgage. Why, then, start over? Refinancing an existing mortgage with another 30-year loan resets your payoff clock and increases the total amount of interest you’ll ultimately pay.

At the end of the day, the term of your refinanced mortgage is as important as the rate. Even if you plan on selling the home before it’s paid off, the shorter term will enable you to build equity faster. When you focus on this bigger picture, your mortgage refinance doesn’t have to be cumbersome or stressful. Instead, it’s a process that builds wealth and improves your finances.
 
How can you tell which is the right loan term for you? Give one of our mortgage professionals a call and find out which one best fits your situation. The answer just may surprise you!

FHA Streamline

The housing market has fallen; this is not new news. This is especially true for home values all across the country. Hundreds of thousands of people are finding that the homes they treasure so much are not nearly as treasured by the public market. However, you may still want to lower your payment and interest rate. How is this possible when home values have fallen so low?

There are a few options you have in front of you. One of those options is a FHA Streamline Refinance. The beautiful thing about this loan is that there is a “No Appraisal” option with minimal credit requirements! This means that you can get a lower fixed rate and payment on your FHA loan; even if you owe more than your home is worth! Since the process is streamlined, there is less hassle, less paperwork, and quicker closing times than with a standard FHA refinance.

Want to know more? Want to find out if you qualify? Give one of our mortgage professionals a call today to find out how you can lower your payment and interest rate with an FHA Streamline!

How To Choose A Mortgage Broker

Despite the recent havoc in the mortgage business since the global credit crisis and housing meltdown which resulted in many mortgage companies both small and large going under (or being swallowed up by the largest banks) there will still be a mortgage broker that offers great mortgage solutions to families, individuals and businesses seeking financing. The one great thing that has come out of the recent housing mess is that most of the time, the low-quality mortgage broker ais gone leaving only the best, most dedicated and knowledgeable mortgage broker to serve your needs.

If you are still deciding whether to use a bank or mortgage broker for your property keep in mind that your mortgage broker can offer wholesale interest rates from the same banks you like but they are also able to help you structure your loan application just right in order to obtain a speedy loan approval and close on your new home or refinance quickly.

So how to choose a mortgage broker? Make sure you don't simply ask for rates and make your decision there.  While we will have some of the best rates in the industry, there are many other factors that you should consider as well.  Whether it is a bank or mortgage broker in they do not have one rate that fits everyone and you could easily find your rate being offset by additional fees and other add-on expenses to the mortgage closing.  Which rate you end up with depends on your individual application, what your credit score is, how much the home is worth, what type of property it is and how much you are trying to borrow. A skilled mortgage broker will gather plenty of information to make a highly accurate assessment of your loan costs.

You should avoid any broker who tries to rush you too quickly without explaining all of your options. The best way to choose a mortgage broker is to interview several and make your decision not only on the offer they make you but also on your confidence in their knowledge and ability to get your loan closed quickly and easily.  You also want a mortgage lender who has access to their own investors, or they have brokers that are aggressive enough to argue on your behalf to get your loan pushed through if there are any problems in underwriting.

The best way to choose a mortgage broker is to get prepared by obtaining a copy of your credit report (we can help you run your credit at any of our offices) and getting all of your income and asset information together such as W2s, tax returns and bank statements as well as any current mortgage information.  Once you have your paperwork in order, schedule an appointment (face to face if possible) and come in for an initial appointment.  The more details you are able to provide us with the more accurate our brokers can be with their offers to lend to you. Refinancing or purchasing a home can be a complicated process even for those who have done it several times before so do not be afraid to ask questions and see which agent is the best fit for you and has the experience needed to make the process as smooth as possible.

Finally, when making a decision on which mortgage broker you are going to use it is important to verify their website and make sure you are dealing with someone reputable who has been treating others well. This can include checking their lending license on the state's website, looking them up with the Better Business Bureau or verifying that they are members of the local state Association of Mortgage Brokers.