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Frequently asked Questions
When there is a slowing economy and the Federal Reserve lowers short-term
interest rates it is encouraging for homeowners with higher interest rates
looking to refinance and buyers wanting to lock in a great low rate. To
help you understand exactly what it means for mortgage interest rates
when the Federal Reserve drops rates, here are answers to commonly asked
questions:
Q. Should I refinance?
Sometimes it makes sense to refinance. Sometimes it doesn't. The decision
to refinance is rarely based solely on interest rates. For instance, you
have to take into consideration things like how long you expect to be
in the home; how much equity you have in the home; what your closing costs
will be; would refinancing include the paying of points?; will your lower
payments more than make up for the closing costs, fees and points if any.
I can help you decide if refinancing makes sense for your situation and
to choose the best program for you.
Q. Should I convert an adjustable to a fixed-rate mortgage?
Again, it will depend on your situation. Generally, it's always a good
idea to get the lowest fixed rate possible. However, if you're in the
first year of a five-year ARM and you plan on moving in three years, it
may not make sense for you to refinance. I can help you make that decision.
Q. Are interest rates higher for a cash-out refinance?
The interest rate you pay on a cash-out loan will be the same that you
pay on a non-cash-out loan if:
 The
loan amount is less than 80% of the value of your home.
The
loan amount does not exceed the current conforming conventional loan amount
of $300,700.
The loan amount is less than 80% of the value of your home.
The loan amount does not exceed the current conforming conventional loan
amount of $300,700. Using the equity in your home to pay off other bills
can be a smart thing. If you're in the process of refinancing, consider
taking some money out to pay off credit card bills, auto loans and any
debt which costs you interest that is not tax deductible*. You may also
be able to write off the interest you pay*.
Q. When should I "lock in" an interest rate?
We cannot predict interest rates – nobody can. But historically, rates
go up much faster than they come down. So if you're thinking about buying
a home or refinancing – get the good rate now (you can always refinance
later if rates drop again). Any in-the-near future drop in interest rates
may not be drastic enough to impact your monthly payment. Of course, every
situation is different, so it's important to discuss all of your options
with me.
Q. Should I pay points to get a lower rate?
If you're refinancing, paying points may not be your best option. Points
paid on a refinance can be deducted from your taxes* only in small increments
- 1/30th a year for a 30-year mortgage – meaning it could be several years
before your lower rate makes up for the points you pay. If you're buying
a home, however, points paid are a deductible expense* for that year.
Q. Are there really loans with "No Closing Costs"?
There are few loans that truly have no closing costs. Sometimes lenders
will not charge application fees and agree to pay the appraisal and title
fees, but they may increase the rate. Lenders can also roll the costs
into the amount of your loan. So, because you're not paying costs up front,
it's called "no closing cost" loans. While slightly increasing
your mortgage might be acceptable to you, keep in mind that it's not really
a cost-free loan.
Q. How much money will I need to bring to closing?
A general guideline is that you'll also need 2% of the purchase price
of the home for prepaid interest to cover the time between the date you
close and your first mortgage payment. Some states may also require prepayment
of property taxes. When refinancing, however, your old mortgage will most
likely have money in escrow that can cover these costs. Some borrowers
get short-term loans while this escrow transfers back to them, but most
pay the money at closing knowing they'll get it back when their escrow
is returned.
Q. How long does it take to refinance?
Refinancing normally takes between 45 to 60 days, depending on a few things.
Do you have a recent appraisal? Are you in an area that appraisers can
get to easily? Are there plenty of comparables in your neighborhood? Often
times, the appraisal is what takes the longest to obtain. And during refinancing
booms, appraisers can be difficult to schedule. Also, have your paperwork
ready. Being prepared helps tremendously to speed the process.
Q. Can I get a bad credit home loan?
Getting a home loan
for people with past credit problems should not be any problem. Apply
today and get an expert opinion on your bad credit situation. We have
many programs even if you have bad credit and low fico scores. If you
have bad credit due to charge offs, late payments, bankruptcy or repossessions,
and have been turned down by financial institutions and banks or mortgage
lenders we can still help. Bad credit home loans and mortgage lenders
provide 40 year loans and interest only options.
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New Home Loans >> Frequently asked Questions