Refinance Home Loans Guidelines And Benefits For Homeowners

This Article Is About Refinance Home Loans Guidelines And Benefits For Homeowners:

Homeowners Have Many Reasons To Consider To Refinance Home Loans At Today’s Historic Low Rates. Home prices have skyrocketed in the past several years. Homeowners are sitting on substantial equity in their homes. Many are able to do a cash-out refinance and pull tax-free money out of their homes to pay bills. Many homeowners who are in the Chapter 13 Bankruptcy repayment plan can explore doing a cash-out refinance and use the proceeds to pay out the Chapter 13 Bankruptcy. Rates are at historic lows and may never be this low again. Inflation is looming.

Rates are expected to increase with inflation expected to skyrocket at historic levels. Americans are noticing the skyrocketing cost of goods and services. The Joe Biden Administration is in a state of denial and has no intention of putting the breaks on spending. They are spending and printing money like never before. What this means is inflation is hitting us like never before. High inflation means high-interest rates. Right now is the time to refinance your home loan and take advantage of today’s stellar low rates.

Reasons To Refinance

There are many reasons why many homeowners consider refinancing current mortgage loans: The main focus in refinancing home loans is to save money on interest expenses. This is done by paying off a higher mortgage rate mortgage into a lower rate refinance home loans. By refinancing, homeowners are reducing the monthly minimum payments.

The reason why homeowners think about refinancing their home loans is to pay off their FHA-insured mortgage loan by refinancing their loan with a conventional loan. This way homeowners no longer have to pay the hefty FHA  annual mortgage insurance premium.

In this article, we will cover and discuss Refinance Home Loans Mortgage Guidelines And Benefits For Homeowners.

Taking Advantage Of Home Due To Appreciation With Cash-Out Refinance

Yet others go through a refinance home loans so they can take cash-out to pay off other financial obligations

  • Use the proceeds from their refinance for other reasons
  • Homeowners can use proceeds from refinance home loans for anything

Proceeds can be used for the following:

  • remodel and/or renovate home
  • vacations
  • start new business
  • pay off high-interest credit cards
  • college
  • elderly health care
  • buy high ticket items.

When Can I Refinance Current Mortgage?

All residential mortgage loans do not have pre-payment penalties. Technically, homeowners can refinance the current home loan at any time. However, homeowners need a tangible net benefit to refinancing home loans. There are some lenders where they have minimum seasoning requirements before borrowers are able to refinance. For example, most lenders will require a 6 month seasoning period before homeowners are able to refinance the current mortgage on rate and term refinance. Cash-out refinances on FHA loans require a 12-month seasoning requirement.

Refinance Home Loan To Lower Current Mortgage Rate

Lower Current Mortgage Rate

Most homeowners refinance their current mortgage loan to get better mortgage rates. Refinancing reduces their monthly principal and interest payments thus their overall monthly housing payments:

  • However, the refinance mortgage needs to have a net tangible benefit to the borrower
  • This is where their housing payment has at least a 5% reduction in their monthly payment
  • For homeowners planning on refinancing a current mortgage loan, the rate reduction should be least reduced by at least 1.0% in order for it to make sense
  • If rate reduction is 0.50% or lower, it may not be the best interest in refinancing the current mortgage loan

This is due to closing costs associated with refinancing a current mortgage and the break-even period.

Refinancing To Eliminate FHA Mortgage Insurance Premium

FHA’s annual mortgage insurance premium is 0.85% %.

  • Many homeowners want to eliminate the costly FHA monthly mortgage insurance premium by refinancing into conventional loans
  • Private mortgage insurance is required on all conventional mortgage loans with a loan to values higher than 80%
  • However, conventional private mortgage insurance can be cheaper than FHA mortgage insurance premiums for borrowers with higher credit scores
  • Many conventional lenders also offer no mortgage insurance required programs known as Lender Paid Mortgage Insurance or LPMI
  • LPMI is where there is no private mortgage insurance premium required in lieu of a slightly higher mortgage rate
  • There is also a one-time private mortgage insurance premium where for a one-time premium PMI payment, there is no annual PMI
  • Similar to upfront FHA MIP
  • Any conventional mortgage with a loan to values lower than 80% LTV, no mortgage insurance is required

UPDATE ON FHA MORTGAGE INSURANCE PREMIUM: THIS BLOG WAS UPDATED ON JULY 28th, 2021 AND THE FHA ANNUAL MORTGAGE INSURANCE PREMIUM IS CURRENTLY AT 0.85%

Reasons To Refinance

Many home buyers purchased their homes when they had lower credit scores and/or poor credit. Lower credit scores mean higher mortgage rates. Borrowers who purchase their homes with higher mortgage interest rates can maximize their credit scores and refinance their home loans into a lower interest rate mortgage. Also, homebuyers who purchased a fixer-upper with an FHA 203k Loan can refinance their home loan because 203k Loans have much higher interest rates than traditional FHA Loans.

NON-QM Loans have become very popular where it has no waiting period requirements. Homebuyers who purchased their homes with NON-QM Mortgages can refinance into traditional mortgages like FHA or Conventional. This can be done after their waiting period after bankruptcy and/or foreclosure has been met.

Update On Cash-Out Refinance Home Loans

Cash-Out Refinance Home Loans

Cash-Out refinances home loans are very popular.  However, many mortgage lenders will limit loan to values on cash-out refinance home loans depending on the mortgage loan programs.

Here is the updated 2021 maximum cash out loan to value on refinance home loans:

  • FHA will allow up to 80% loan to value on a cash-out refinance
  • Fannie Mae and Freddie Mac will let you do a cash-out refinance up to 80% LTV
  • VA permits up to 90% cash out on VA Loans
  • Jumbo Mortgages will normally have a maximum of 75% to 80% loan to value on cash-out refinance home loans
  • FHA and VA Streamline Refinance Mortgages are available with no appraisal, income, credit

Mortgage rates on a cash-out refinance are normally slightly higher than a rate and term refinance mortgage.

Homeowners who need to refinance their current loan with a direct lender with no overlays on government and/or conventional loans can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] We have no mortgage overlays on FHA, VA, USDA, and Conventional Loans.

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