Refinancing a Home

Debt Consolidation

Consolidating high interest debt into a tax deductible mortgage loan is the fastest way to improve ones overall financial position. In many cases, a borrower can save hundreds or even thousands of dollars per month by consolidating their debt. Ask your lender about government backed loan programs that allow for debt consolidation to 95% of the appraised value of the property without having to pay high interest rates. A borrower does not need perfect credit history to qualify for a low rate 95% debt consolidation loan.

Streamline Refinance

Anyone that currently has a government insured mortgage (FHA/VA/USDA) is eligible for a streamline rate reduction loan if interest rates are lower today than the current rate on the existing mortgage. As long as the borrower has recently been paying their mortgage on time, he/she is automatically eligible for the reduced interest rate and lower monthly payment. The borrower does not have to re-qualify for a new loan. There is no credit check, no income check, no job verification required. In most cases, it is not even necessary to have an appraisal done. Even if you are currently unemployed, you will still be eligible for a streamline refinance if you currently have a government-insured mortgage. If you are currently late on your other bills, you will still be eligible for a lower interest rate and lower monthly payment provided you are currently paying your mortgage loan on time.

Rate and Term Refinance

Rate and term refinancing simply means refinancing the existing amount owed on the mortgage, either to obtain a lower interest rate and monthly payment, to shorten or lengthen the loan term, or to remove the monthly mortgage insurance premiums.

Removing PMI

PMI is insurance that the lender requires a borrower to carry if they have less than 20% equity in their home. If a borrower defaults on their loan, the insurance company pays the lender for the loss that is incurred. It does nothing to benefit the borrower. If your home has appreciated since it was purchased, you may be eligible to refinance your loan to remove the monthly private mortgage insurance premium (PMI). This can save a borrower hundreds or even thousands of dollars per year in unnecessary insurance payments that only protect the lender, not the borrower.

Closing Costs Financed

When refinancing, virtually all lenders allow all closing costs to be paid through the refinance; except for the home appraisal. As such, except for the cost of the appraisal, refinancing is ordinarily a zero "out of pocket" transaction. However, some lenders do also require an application, processing and/or credit fee to be advanced by the borrower in addition to the appraisal fee.

Manufactured Homes

Certain Manufactured homes are eligible for government-insured financing. They must be doublewide and on a permanent foundation. They must be constructed after 1976 to qualify.

Home Equity Lines of Credit

A Home Equity Line of Credit is a "revolving loan". It is usually in the form of a first mortgage. However, it can be a first, second or third position mortgage. In effect, it works like a low interest rate credit card, but it is secured against your home. Borrowers can draw all or part of the credit line as desired.

Leave Collections Unpaid at Closing

If you owe money on one or several unpaid collection accounts, some lenders will allow a borrower to refinance a home with no requirement to pay off the collections. Different loan products have different rules regarding unpaid collections. You will want to talk to your lender to determine in advance whether or not any of the collections will need to be paid prior to or at closing. While collections can sometimes remain open and unpaid, legitimate court judgments will always need to be settled prior to (or at) closing. In many cases, these debts can be settled for approximately 50% of the balance owed.

Pay Creditors at Closing - Collections / Charge Offs / Tax Liens / Judgments

When purchasing or refinancing, most lenders allow any creditor to be paid at closing; including collection accounts, charge offs, tax liens, judgments and/or other creditors. When timely closings are required due to purchase contracts or agreements between a Buyer and Seller, this can help meet those time requirements.

Prior Bankruptcy

Having a prior bankruptcy does not prevent one from purchasing a home or refinancing their mortgage. As a general rule, a chapter 7 bankruptcy will need to be discharged for 2 years in order for a borrower to obtain the best loan terms. A chapter 13 will need to be 2 years from the filing date…and discharged prior to loan closing. If the bankruptcy is more recent, offers with higher rates and larger down payment requirements (or more equity in the case of a refinance) can be expected. If there were extenuating circumstances that caused the bankruptcy, a borrower can qualify for a low rate government-backed mortgage sooner than the standard 2 year waiting period. Talk to your lender regarding your specific situation.

Prior Foreclosure

Having a prior foreclosure does not prevent one from purchasing a home or refinancing their mortgage. As a general rule, if the foreclosure is over 3 years old, a borrower can obtain the same low rate as a borrower who never had a foreclosure. If the foreclosure is more recent, offers with higher rates and larger down payment requirements (or more equity in the case of a refinance) can be expected. If there were extenuating circumstances that caused the foreclosure, a borrower can qualify for a low rate government-backed mortgage sooner than the standard 3 year waiting period. Talk to your lender regarding your specific situation.

Fast Closings / Fast Cash

Most lenders actually have the ability to arrange "the lender's part of the job" for a fast closing in as little as 48 hours. However, no matter how adept they might be, they remain human and are also at the mercy of the title search and real estate appraiser's schedule.

Although we have seen rushed closings come together in 3 business days, a super rush almost always takes 5-7. Beware of promises from any mortgage lender or broker that promises a 3 day turn around. If cash flow is pressing, try to plan accordingly. If they tell you 3 days, count on 7-10.

Deed Transfer/Refinance

A Deed Transfer/Refinance is much as it sounds. It is a purchase transaction in effect. In most cases it is required that the transfer be made from a family member or close friend. A refinance is ordered on the subject property by the new potential owner and the deed to the property is transferred simultaneously with the closing of the refinance. With the correct set of circumstances, this can be done as a "no money down" transaction with all closing costs financed into the deal.

Home Loans after Divorce

Home Loans can usually be obtained by either spouse after divorce for a fresh start for purchasing a new home or refinancing an ex-spouse off of the current deed.

Refinance Ex-Spouse off of Deed / Pay off Ex-Spouse

Provided you are in agreement with your ex-spouse about a settlement amount; and there is sufficient equity in the subject property, this can usually be accomplished as follows: A refinance is ordered in the name of the soon to be sole owner. At closing the refinance is funded paying off the existing mortgage plus the settlement amount to the ex-Spouse. Simultaneously a new deed is transferred to the new sole owner of the property.

Often the new owner/borrower is able to draw cash out funds from the same refinance to pay creditors, clear up credit issues and/or cash out for other personal reasons. It is usually also possible to use the same type of refinance and simultaneously add names to the new deed such as a new spouse, family members and/or other third party(s) that may want to share in the ownership and mortgage responsibility of the subject property. This can be helpful if stronger credit of the third party and/or the combined income of joint borrowers can bring upon a lower interest rate-thus a preferable monthly payment.

Credit Damaged by Divorce or Ex-spouse

Everybody's life situations are personal, individual and rarely are any two divorce annals identical; nor are they often uncomplicated. The right lenders view divorce as an acceptable reason for credit problems. It's well known that a divorce can damage the credit of a credit worthy person.

Some lenders understand this; and unfortunately, some say they understand it-but actually do not understand it at all. Many lenders do not see the "whole picture" and therefore take the position that a borrower's credit was not damaged as a result of divorce because the derogatory history stretches over too long of a time period prior to the actual time of the divorce. Some say the interest rate offered should be high due to the risk factor. Others refrain from making an offer.

However, the right lenders do understand that although sometimes a divorce can be triggered by a seemingly "overnight" situation, it is usually not caused by an overnight experience. As such, when divorce is a factor and a long term credit damaging history prevails, the right lenders may increase interest rates moderately to offset some lender risk, but not do so abusively. Success in dealing with these situations can be simplified by knowing which lenders understand divorce and which do not.