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7 Things You Need to Know About Refinancing Your Home

With mortgage rates at an all time low, it's understandable you may be looking into refinancing your home. Below are 7 key factors to consider before doing so.

1. Percentage point break: Despite the attractive rates, homeowners will have to thoroughly analyze their financial position before determining whether or not now is the time to refinance. A good rule of thumb, however, is if your mortgage rate is a full percentage point or more higher than current rates, you should consider refinancing, says Orawin Velz of the Mortgage Bankers Association. "If your rate is about 6 percent currently, then it is a good time to think about it," Velz says. (Keep in mind that anyone trying to refinance a so-called "jumbo loan"--one that's too large for Fannie Mae and Freddie Mac to purchase--will face sharply higher rates, says Keith Gumbinger of HSH Associates.) The transaction fees lenders charge are another major consideration. Higher fees, of course, eat into the potential savings of a reduced mortgage rate. So the lower the fees, the better. "The fees that you should be paying need to be low enough so that you can recoup your money through the break in the interest rate in a reasonable period of time--usually under four years," Gumbinger says. (More on fees below.)

2. Half rejected: Although more Americans are looking to refinance, a significant chunk of applications won't be approved. In the first half of 2008, roughly 60 percent of refinancing applications were turned into loans, Velz says. "But because of the intensified turmoil in the second half of the year and continued decline in home prices, we believe that the rate has probably declined to [about 50 percent.]" In order to qualify for refinancing, homeowners will need to meet certain specific criteria.

3. FICO 740: While 720 is still considered by some to be a solid FICO score, it's not good enough to obtain the best rates in today's refinancing market, says Chris Freemott, president of All American Mortgage in Naperville, Ill. Instead, borrowers will need a FICO score of at least 740. "FICOs are everything," Freemott says. "[A FICO score of] 740 is the benchmark for the lowest possible rates." Borrowers that don't have this score can still refinance, but they're likely to face higher rates.

4. Equity and documentation: Home equity can be another significant barrier to refinancing today. The real estate crash has sucked a great deal of equity out of homes. Zillow says roughly one in seven American homeowners actually have negative equity—meaning they owe more on their mortgage than their property is worth. In order to qualify for refinancing, homeowners will have to have a minimum of 3 percent equity in their homes, Velz says. In addition to solid credit and home equity, borrowers will also need to be able to document their income in order to qualify for refinancing.

5. Fee paying options: Fees associated with mortgage refinancing vary widely from market to market and borrower to borrower. But on average, a $200,000 refinancing loan may come with up to $6,000 in fees, Gumbinger says. Borrowers have three main options for paying such fees. Those with enough cash may want to just pay the fees up front. Borrowers with less cash on hand may be able to opt for a higher interest rate instead of paying the fees. A third possibility is to have the fees tacked on to the principal of the mortgage, Gumbinger says. The key is to chat with your mortgage lender about structuring the fee payment so that it makes the most economic sense for you. "I've been doing this for 11 years now and… I've never written the same loan twice," Freemott says. "Everyone has a little difference to their situation."

6. Shop around: Given tougher lending standards and falling home prices, homeowners--especially those without perfect credit profiles--may have to get used to hearing the word no. But just because one lender turns you down doesn't mean you can't find another who's willing to refinance your mortgage. "Two or three years ago, lenders were crawling through the doors and windows to serve you," Gumbinger says. "We're 180 degrees out from there right now. You have to go find the lenders." So shop around. Research rates online, call up different lenders, and find out who's willing to offer you the best deal.

7. Be patient: The wave of refinancing applications comes amid a period of significant downsizing in the lending industry. That means there are fewer employees on hand to handle the surge in business. As a result, expect slow service. "The time to even find out whether your loan has been approved or not could run 30 days," says Mark Hanson, a managing director who handles real estate and finance research at the Field Check Group.

Source: Yahoo Real Estate

Should you refinance your home?

Below is an excerpt from a recent article focusing on refinancing options. In today's economy, it's important to be aware of your options. We are committed to doing everything we can to help you with questions regarding the real estate market.

"Refinancing into a long-term loan can extend the years in which you make payments and that can increase the amount you ultimately pay for the loan, even if the rate is lower. Even if you decide to refinance, you may not be sure of whether to go fixed or variable, long or short. Should you roll your other debts into your home mortgage?


Here's how to decide whether to refinance, and how to go about it to get the best possible loan for your situation:

• Use an online calculator. It will give you a good idea of how much you'll spend over the life of the loan, and whether the refi makes sense in a strictly dollars and cents way. Check out the calculators at bankrate.com and hsh.com.
• Get several quotes, and beware of extra costs and traps. The points you may be asked to pay to secure your loan are just one cost of a refinancing. You'll also be tapped for a home appraisal and miscellaneous other lender fees. Ask your lender for a good faith estimate of all closing costs. Avoid getting any loan that carries prepayment penalties: these are illegal in some, but not all states and situations. Compare web-based lenders and a local lender or two.Get recommendations from friends for mortgage professionals they have dealt with before.
• Skip the ARM. Rates now are within spitting distance of their historic lows, so why wouldn't you want to lock them in? Some lenders, such as Countrywide, aren't charging any less for adjustable rate loans than they are for fixed rate loans.
• Make your own interest rate prediction about floating rate debt. Home equity lines of credit (HELOC) currently are charging rates as low as 3.5 percent; they are cheaper than regular mortgages now. But that may not last. Borrowers will have to make their best guess in predicting whether they will be able to pay off their HELOCs before rates rise to mortgage-topping levels. If you're looking at a very large balance on a HELOC and are uncertain about when -- if ever -- you will be able to pay it off, consider rolling it into a new mortgage along with your existing loan.
• If you're worried about cash flow, go long. If you're having trouble making your mortgage payment, and are worried about your job and future earnings prospects, consider refinancing into a long-term 30-year fixed-rate loan. That can be a home-saver, as it may lower your monthly payments enough so that you can keep up with them.
  If your finances strengthen, you can make extra payments and burn the loan early.
• If you are nearing retirement, resist the urge to refinance, especially if you'll have to use tax-deferred money to make your monthly payments. For every IRA or 401(k) withdrawal you'll take to make a mortgage payment, you'll also have to withdraw enough extra to cover the income taxes on that withdrawal. That can make your mortgage even more expensive. Use a pre-retirement refinancing only if it will save you significantly in interest over the long term, or if selling your home is part of your retirement plan, and you simply need to lower your payments for a few years.
• Don't use your new mortgage to pay off credit card and car loans. That puts you in the position of paying for that meal or handbag for 30 years. And it puts your house on the line for debt that is now unsecured; or secured only by a car. That's too risky."

For the full article, click here.

Source: Reuters.com

First Snow of 2009!

Today, January 20th, 2009, we received our first snow fall in the Raleigh/Durham area with total accumulation ranging from 2"-7", depending on location.

These photos of Creekside Commons capture the beauty of the snow.

For more information on Creekside Commons, visit the community website:

http://www.creeksidecommonsonline.com/

Relocating in the near future?

For years we have been referring our clients to All American Relocation and have also used their services personally. If you, or someone you know, is looking for a relocation company to help with an upcoming move, be sure to call All American first.

All American is an award winning service provider of both domestic and international household and commercial relocation services. They specialize in providing residential moving services, employee relocations, industrial and office relocations, office furnishing and furniture installation, storage, warehousing, asset management and specialized transportation services. Their dedication to customer satisfaction and resources including the latest technology and tools is what sets them apart from competitors.


Be sure to check out their website:
http://www.aacorp-usa.com/