Thursday, April 11, 2013

Refinance- a Realtor's Opinion & 5 Things Preventing You From Getting a Mortgage Refinance

Rates are still record low.  I have had numerous inquiries from friends and past clients in 2013 about the current condition of the lending industry and whether a refinance is possible or even worth the hassle.  A common misconception among those folks NOT in an industry that deals directly with lending institutions is that the system is broken.  That is so FAR from the case!

Money is flowing, the market is moving swiftly, and people are CASHING IN on the low interest rates.  That being said, WHO you choose to work with and your current financial status dramatically influences how successful you will be in the pursuit of a lower interest rate! 

There are many factors to consider: will the property appraise, do you have equity, due to lower value will you be forced to pay PMI, will you be in the property long enough OR is the rate LOW enough from your current rate to actually offset the closing costs.

My Best Advice: Please contact a Realtor before you begin the refi process and have all of your "ducks in a row" when you apply. First things first- what is your property worth?  A Realtor can provide you with concrete data.   At least in St. Louis, we can easily access your private and extensive tax records including your mortgage information.  Paired with your full neighborhood sales data, including which sales within your radius were distressed or foreclosures, an approximate amount of property equity is easily determined. THIS STEP IS VITAL to ensure whether an attempt at refi is "worth it" and most reputable agents do not mind assisting their friends, family, and clients with this information. 

My lender stories over the past 3 years is an entirely different blog post. Frankly, there are 2-3 banks that I will STRONGLY urge my clients not to use- and yes, they are names that you will recognize- as their backlog makes a timely & successful closing nearly impossible. The fact is: Realtors (and the Title Companies that we work hand-in-hand with) deal with lenders on a daily basis and know who is getting these loans pushed through and who is not. Period.   Trust me, we can save you many headaches!

Anyhoo, I stumbled upon this article a couple of days ago and felt compelled to share as it is SPOT ON.   Great advice via AOL Real Estate...

5 Things Preventing You From Getting a Mortgage Refinance

By Chris Birk on AOL Real Estate

Mortgage rates are beginning to creep up, but they're still well within the kind of range that makes longtime homeowners shake their heads in disbelief.  The average interest rate on a 30-year fixed-rate mortgage hit 3.63 percent for the week of March 10, marking the highest point since last summer.

So while a seller's market may be taking shape, it's still a great time to shop for a mortgage, especially a refinance. That's why it's so frustrating for homeowners who can't get on the bus.

So what's keeping you from getting a refinance loan right now? Here's a look at five of the most common culprits:

So-So Credit

Same as it ever was when it comes to mortgage lending -- you're going to need to meet a lender's qualifying credit score for a refinance, which in many cases will be higher than what you'd need for a purchase loan. For conventional refinancing, you're likely looking for at least a 740 score to really capitalize on current rates. The bar won't be quite so high if you're going after a government-backed option like an FHA or VA loan. Make no mistake: A loan program may not have a credit score requirement, but the lenders who actually issue loans certainly will. Right now, for example, VA lenders are generally looking for at least a 620 score. But you'll more than likely need at least a 640 to start the refinance conversation.

Your Home Is Underwater

Values are starting to rebound in some parts of the country, but a lower-than-anticipated appraisal remains a common refi-killer. Consumers who owe more than their home is worth know this all too well. Pursuing a traditional refinance is all but impossible for underwater homeowners -- and that explains why the government's special refinance program for distressed borrowers is absolutely booming. Refinances through the Home Affordable Refinance Program (HARP) topped 1 million in 2012, more than double the year prior. The HARP program helps underwater homeowners with Fannie Mae- and Freddie Mac-backed loans. It's possible for some lenders to process refinance applications without an appraisal (the VA's Streamline program is one example). But today that's a rare exception.

Not Enough Income

All indications are the economy is on the upswing. While that's good news for the nation, continued recovery doesn't suddenly put more money in your pocket. Many homeowners lost jobs or took pay cuts in the wake of the economic crisis. One missed mortgage payment can stymie a refinance application. Lenders will typically want to see 12 consecutive months of on-time payments. Diminished income can also make it tough to actually pay for the refinance, which like any mortgage loan comes with costs and fees. Self-employed homeowners will need at least 2 years of tax returns.

You Bought Big

Jumbo loans can present a unique set of refinance difficulties. These non-conforming loans typically require sterling credit and significant skin in the game to acquire. It can be especially tough when your $625,000 home has lost a third of its value. Jumbo homeowners may have to come to the closing table with cash in order to secure that lower rate.

Mortgage Insurance

Paying mortgage insurance can complicate your ability to secure a refinance. That's especially true for lender-paid mortgage insurance. Either form presents problems for the federal HARP program as well, although some lenders have loosened restrictions a bit in the last two years. If this is currently an obstacle, keep searching for a lender that will work with you.