Planning to refinance your house? Deciding through the advertisements, telephone solicitations, direct mail can be mean endless choices. Opting to try your mortgage holder? If yes, buyer be aware offers to good to be true. What to know about your mortgage holder’s offer…
*For anyone who has refinanced their home or bought a home since 2008, know all too well the reality of what it’s like to get a mortgage. The questions, and the need document every aspect of the credit, debt, income and assets.
Providing Documentation
A common pitch given to consumers is “Since your loan is already with us, your loan process will be made much easier.” The reality of it is if you refinance your home with your current mortgage holder or even a separate company, you’ll need to provide tax returns, W2’s, pay stubs and bank statements. Pre-2014, it was possible to provide lighter documentation for lenders originating and selling loans directly to Fannie Mae and Freddie Mac. Game changed January 10, 2014 mandating lenders prove a consumer’s ability to repay by having an appropriate debt to income ratio as well as providing full supporting financial documentation. In other words, since all lenders are going to require the same documentation, is not necessarily going to be easier with your current lender. History of timely repayment on time is not an alternative for documentation. Your current lender does not store your most recent year’s tax returns or most recent last month’s bank statements necessary in consummating a refinance especially, if you bank with another financial institution.
Appraisal Requirement
There is all but, two programs presently in place for homeowners wishing to refinance without the need to have a new appraisal completed. An FHA Streamline Refinance paying off one FHA Loan in exchange for a new FHA Loan with a preferred interest rate does not require an appraisal. Making Homes Affordable Program, dubbed Harp 2 that specifically states on a case-by-case basis if the loan being paid off was taken at June 1, 2009 and the loan is owned by Fannie Mae or Freddie Mac, a borrower has the possibility of refinancing without an appraisal. Otherwise, in a traditional refinance a home appraisal is required to determine the loan to value and subsequent ability qualify for the mortgage.
Decision Maker Still Involved
Usually, the loan package created by your loan officer is reviewed by decision-maker, an underwriter with the mortgage company whom you’re applying with. The job of the underwriter is to mitigate risk for your mortgage holder i.e. the lender. In order to mitigate the possibility of loan risk they create conditions such as providing updated financial documentation, explaining a deposit in the bank account for example and signoff those conditions for a final approval for docs to be drawn. Whether you go with the new mortgage company or you stay with your current mortgage holder, refinance request will be handled by an underwriter will sign off your ability to qualify.
Closing Fees Are On A Level Playing Field
No lender has a monopoly on the market creating unfair competitive advantage. Due to both mortgage and insurance industry regulations closing costs rarely fluctuate amongst these neutral third-parties. Closing costs vary in terms of what lenders charge in lender fees, origination fees and discount points.
Below Market Rates
Mortgage money comes from the creation of loans created and bought and sold on secondary mortgage market. Lenders have access mostly to the same rates and programs, but fees vary amongst lenders. One lender cannot offer rates dramatically lower than market on the exception of loan program. Loan programs change the interest rate dynamic, for example a 10 year fixed rate is always lower than 30 year fixed rate.
When To Refinance With Current Mortgage Holder
If you have a previous credit challenge such as a bankruptcy, recently had or are near foreclosure or there is a major income concern a competing lender could not otherwise offer you a second offer for, then on a case-by-case basis, it may make sense to refinance your loan with your current mortgage holder. In such a circumstance however, it would not be a refinance, but a loan modification. Another common instance in recent years was procuring a loan modification in lieu of a refinancing due to loan-to-value restrictions. Since the real estate market has picked in Sonoma County and throughout California, refinancing is now a possibility for homeowners who previously were unable to do so due to a lack of home-equity.
Why a second opinion matters
Procuring a second opinion from an outside lender against and your mortgage holder’s quote is always a prudent route to explore, even more so if you have steady employment, good credit and manageable debts.Working with an expert loan professional could make the difference between having a quick, efficient process with reasonable rates and fees versus a process that is not a guarantee due to the mere fact they collect your mortgage payment each month.
Looking to refinance your mortgage? We can help with the primary home, investment property or second home. Start today by getting a free mortgage refinance rate quote!
