Mortgage Refinance – Tips For Reducing Home Loan Payments

Mortgage refinance provides borrowers with the option to reduce home loan payments or obtain cash from accrued home equity. Prior to refinancing mortgage notes, homeowners should become informed of the various options and compare interest rates and closing costs of various lenders.

The first step of mortgage refinance requires borrowers to review their current home loan documents. The majority of housing loans include prepayment penalties when loans are repaid before the contract expires. Homeowners carrying a first and second mortgage could incur substantial costs which negate savings obtained through refinancing.

Borrowers should conduct research to compare current home refinancing interest rates. Mortgage lenders recommend entering into mortgage refinance when interest rates decrease by 2-percent or more than the interest charged on original loan documents.

Homeowners engaging in mortgage refinancing are required to establish a new home loan. Funding is used to pay off outstanding balances of first and second mortgages. Borrowers holding two or more home loans and meet lending criteria can combine both loans into the refinanced mortgage.

The first step of refinancing involves submitting a new loan application. Borrowers are generally required to pay loan application, origination and settlement fees. Refinance closing costs typically range between 3- and 6-percent of outstanding principal sum and interest.

Borrowers who plan to refinance first and second mortgages are often shocked to discover they are responsible for prepayment penalties of current home loans along with closing costs of refinanced mortgages. These costs can quickly add up to several thousand dollars.

Reduced interest rates can eventually save homeowners more than the cost of home refinancing fees. However, loan origination for refinanced loans can be an expensive upfront cost.

Some banks offer no closing cost refinancing. The truth is there is no such thing as no-cost loans. Instead of paying refinance closing costs upfront, the fees are included in the principal sum amount. Homeowners pay interest on closing fees for the duration of the mortgage note.

Refinanced mortgages generally extend repayment terms. If borrowers have 20 years remaining on their current note and refinance into a 30-year loan, they are adding an additional 10 years to their loan. Before entering into a refi mortgage agreement it is crucial to calculate the true costs to compare long term savings.

In recent years, multiple changes have occurred within the lending industry. Homeowners must understand the advantages and disadvantages of refinancing to determine if entering into a new home loan is a financially sound decision.

The Federal Reserve Board provides numerous resources and consumer guides to refinancing via their website at Home loan refinance worksheets, eligibility requirements, lending resources, and federal agency contacts are available at no charge.

The United States Department of Housing and Urban Development (HUD) provides mortgage refinance resources and information via their website at Borrowers holding FHA loans are entitled to complimentary counseling through approved agencies to help them determine if refinancing is plausible.

The Federal Housing Authority offers the Streamline Refinancing program to borrowers holding FHA loans. Streamline allows homeowners with decent FICO scores and a solid payment history to refinance mortgages without undergoing income verification and credit checks.

Streamline Refinancing prohibits borrowers from obtaining cash through accrued equity and is only intended to reduce mortgage payments for borrowers struggling to make monthly payments or those facing foreclosure.

Regardless of the type of mortgage loan, borrowers should only refinance when they can significantly reduce monthly payments. For most people, their home is their most valuable asset. Careful consideration should be given before refinancing a home loan to ensure borrowers do not place their property at risk.

Home Loan Approval

Steps to Get a Home Loan Approval

If you’re looking for a home loan approval to take advantage of this year’s tax credit. Here are a few quick tips for obtaining your Home Loan Approval.

The more things change, the more they remain the same. It is nonetheless a good bet to start early.

Here are a few quick steps to put you in the best position for your home loan approval.

Step 1: Check your credit history.

This probably could be step #1. Go to and get a free copy of your report. As a reaction to being perhaps a little too soft on credit before, the mortgage industry is being incredibly tough on credit today. Unfortunately, many people have inaccurate items in their credit report and don’t know it. Use the free annual credit report dot com site to get your copy in advance.

Step 2: Organize your employment and income information

When applying for a Home Loan Approval a lender will ask for documentation to support a your current and previous employment. Lenders will request copies of 30 days worth of pay stubs, and tax returns and W2′s for the past 2 years. If you have paperwork prepared in advance, your loan will be underwritten faster and with less problems.

Step 3: Organize asset documentation

Underwriting will require copies of 2 months (or 60 days) checking and savings bank statements, investment accounts, retirement accounts and/or gift documentation to be able to complete a Home Loan Approval.

Step 4: Identify properties that fit the guidelines of the loan program you are seeking

The Home Loan Approval process will also include a review of the subject property being purchased. The lender will want to know to if you will be buying a single family residence, a 2- to 4-unit property or a condo. The condition and the appraised value of the property will dictate the Home Loan Approval outcome as their guidelines are different for the various property types available in the marketplace.

Here is a summary of the paperwork you’ll ultimately need for an approval on your loan:

  • most recent two pay stubs
  • last two years W-2 forms
  • If you’re self-employed or a commissioned sales person, lenders will want to see the last two years 1040 tax returns with ALL accompanying schedules. Sign all copies where you would normally sign the original
  • most recent two months bank statements (all pages), documenting the down payment
  • most recent two month securities accounts statements. Lenders will only “credit” 70% of the value of that account
  • most recent account statement for an IRA or 401-k account. Lenders will only credit 60% of the value of that account.
  • copy of the dicorce decree if you are divorced
  • copy of your driver’s license, passport, or social security card (two out of three)
  • If you plan to use a gift, from a family member, for the down payment, the documentation needs to be REALLY complete. We need a gift letter, signed by both the donor and recipient, a copy of the cancelled check (from the gift), and two months bank statements from the donor, documenting that they owned those funds for 60 days, prior to the gift.

Tips Before Getting A Home Loan

Buying a house is very exciting and beneficial. Individuals can check out different houses with amazing features. They can also check the property easily to determine if it can suit your needs. As for the benefits, having your own home can provide you comfort and relaxation you need. Not to mention, your family will have a good place to live in. Finally, you will have a good investment that can help you make your future better. However, before you can purchase a house, you need to have sufficient finances. And, this is one of the most common issues a home buyer must deal with. Luckily, there are options that can help get rid of this issue like a home loan.

A home loan is a debt provided by a banking institution or a company to an individual. This loan has an interest rate that borrowers need to pay off. So, if you decided that you need to get a loan to purchase a house, you need to consider the following tips.

Determine the amount you need to borrower

As of now, individuals can borrow any amount from banking institutions. However, you also need to consider if you can pay you loans. This is important since you need to pay your loan on time to avoid legal charges from the institution.

Have a good credit history

In order to loan substantial finances, you need to sure that you have a good credit history. This is important since some banking institutions require borrowers to provide them with the financial statements. With this said, individuals with bad credit record have small chances of getting a loan.

Fix legal documents

Other than financial statements, you should also arrange other legal documentations before getting a loan from your current job, status and other vital information needed by banking institutions to determine if you are able to pay your loans or not.

Choose the right loan option

In case that banking institutions granted a loan for you, the last thing you need to do is to opt for the right loan option. This is also important to ensure that you can easily pay the loan. Apart from that, you can be sure that you can accommodate your needs in order to make your lifestyle better and more efficient.

With these tips, individuals will have sufficient finances that can help them purchase the ideal home that can provide them with the benefits they need to make their life better and more stable.