Posted by Elizabeth Dennis on April 9, 2011 | No Comments
Refinancing your home loan can be a great way to save hundreds of dollars in interest over the life of the loan and reduce monthly costs at the same time. However, it is important to recognize that the act of refinancing can cost several thousand dollars as there are fees which have to be paid upfront with cash or rolled into the new loan. If you have an idea of what to expect, however, you can get a general idea of how much a refinance will cost you and whether it is worth the money and the hassle.
In general, a homeowner can expect to pay anywhere from two to three percent of the loan amount when refinancing a home loan in closing costs. This amount is made up of various fees which you will encounter when refinancing. The most prevalent fee is the refinance loan application fee. This will cost the homeowner anywhere from $250 to $500. The lender closing fees are also tacked on and average about $750 nationwide. There are also settlement fees which can tack on an additional $350. Depending in which state you live, title examination fees can range from $150 to $450. Title insurance will also vary from state to state and will run about $225 to $400. Refinancing also takes a lot of documentation and the fees for preparing those documents can run from $200 to $400. There can also be fees for home inspections, mortgage insurance and hazard insurance.
The above amounts are only estimates and can vary greatly depending on your lender and state. In some cases, it will pay to shop around for the best rate especially when it comes to title insurance a title search. You may also be able to save money if the work related to the mortgage is still current. For example, this could include fees for surveys or inspections. Before you commit to any loan or start the refinancing procedure, it may be a good idea to talk to a real estate professional or lawyer in order to get a better idea of the fees which you might be facing. In some cases, you may not have the cash available to go through with the refinancing at that particular moment and would find it better to wait until you can save a little bit more.
An important thing to consider when going through a refinance is to pay attention to the time of the month. When the refinance closes, there will likely be some outstanding interest on the old loan. For example, if you close on the 15th of the month, you will have fifteen days of interest due on the old loan and about fifteen days on the new one. Your first payment would not be due until the first of the next month because you will have pain the previous month’s interest in the closing costs. These are just some extra fees that can get tacked on that most people don’t think about.
Posted by Elizabeth Dennis on March 6, 2011 | No Comments
Thanks to the housing market collapse, it is now a little harder for those who are self-employed to get a home mortgage. However, if you do plenty of legwork beforehand and have the credit history and income to back up your documentation, the dream of owning a home can still be a reality.
If you self-employed and looking for a mortgage, the first thing you must do is be very honest with yourself about what you can and cannot afford. This is especially true if you are dealing with low or no-documentation loans because it can be easy to fudge the numbers a little bit. You are the only one who truly knows the ebbs and flows of your business and if you can afford the house that you really want.
Once you are certain that you can make the payments, there are numerous things the self-employed can do to make themselves more attractive to lenders. First, you will want your credit score to be the highest it can possibly be. Be sure to get a free credit report and check for any inconsistencies or mistakes and have them corrected immediately. Those with a score over 730 have a better chance of getting a much lower rate, thereby saving themselves thousands of dollars over the course of the loan.
Secondly, put down as much as you can safely afford to do so. This will make you much more attractive to a lender and you will be less likely to walk away from a home with more money invested into it. Next, have some significant savings in the bank. This will show lenders that even if you do fall on hard times, you will have plenty of money to pull from in order to keep up with the payments. In addition, you will want to pay off any consumer debts such as credit cards. This will not only free up money for positive cash flow, but it will make it easier to qualify for a higher loan amount.
Lastly, have an established track record of self-employment. Typically, banks and other lenders will want to see at least two years of documentation.
Speaking of documentation, those who are self-employed will find themselves having to present more of it than traditional workers. Since you won’t have W-2’s to present, you may find yourself having to show at least two years worth of tax returns, profit and loss statements, business credit reports, balance sheets and documentation which shows your income.
It may also be easier to qualify for a loan if your spouse has a traditional job and a W-2 from their employment. Because you will be sharing the house, this provides peace of mind that there is a steady income in which to fall back on if need be.
Lastly, be sure to find a lender, either via a bank or mortgage broker, who specialized in loans for the self-employed. Typically, they will know which type of mortgage will work best for your particular situation and know where to look to get the best rates.
Posted by Elizabeth Dennis on February 20, 2011 | No Comments
There are times when all of us could a little help financially. Sometimes, however, that help comes in the form of a clean slate. When this happens, bankruptcy is often the only solution. But it doesn’t have to be the end of your financial road. There are still plenty of ways you can qualify for a home mortgage after a bankruptcy.
In most cases, financial advisors will tell consumers to wait at least two years after a bankruptcy to try and get a mortgage. However, there are times where if you have 15% down and can cover the closing cost, you could qualify the day after your debts are discharged. But keep in mind that you might have a hard time explaining to a bankruptcy judge where all of this money suddenly came from. Also, understand that the rates won’t be as attractive as the will be if you put two or more years in between you and the discharge. When you take into consideration that you will be paying interest on the loan for thirty years, getting a lower rate will save you significant money in the long run.
You also cannot be in any form of credit counseling or similar program when trying to get a mortgage. The best idea is to go on and discharge those debts as lenders will be looking at debt to income ratio, savings and employment history.
Even if you have a bankruptcy in your past, there are still ways to make yourself attractive to lenders. First, keep the same job. Lenders like to see buyers who have a long history of stability with the same employer. Many times, they like to see someone who has been with the same company for at least a year. While employed and since your debts are taken care of, put some money in the bank to show lenders that you do know how to save. In addition, get a credit card with a low limit. Put a little on that card each month, but be sure to pay it off when the statement comes. This will help you use credit to rebuild your credit. Lastly, pay all your bills on time and you will soon have a good enough credit background to qualify for a mortgage even after a bankruptcy.
You can even refinance after discharging your debts. If you file a Chapter 7, you can do so immediately. If, however, you file Chapter 13 you can actually refinance before the discharge takes place since you are on a payment plan for the next three to five years. You may even payoff your Chapter 13 if you have enough equity in your home at the time of the filing. In addition, depending on your trustee rating, credit score and income you may be able to find 100% financing. You will need to find a mortgage broker to do this work for you. Banks won’t do this type of refinancing until you have rebuilt your credit over a number of years.
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