This BLOG On Refinance Home Loans Guidelines And Benefits For Homeowners Was UPDATED And PUBLISHED On July 30th, 2019
Homeowners Have Many Reasons To Consider To Refinance Home Loans
There are many reasons why many homeowners consider to refinance current mortgage loan:
- The main focus in refinancing home loans is to save money on interest expense
- 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
- Other reasons why many folks go through refinance 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
- start new business
- pay off high-interest credit cards
- 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 that will require a 6 month seasoning period before homeowners are able to refinance the current mortgage
Refinance Home Loan To 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
- Homeowners planning on refinancing current mortgage loan, the rate reduction should be at 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 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 annual mortgage insurance premium is at 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 loan with a loan to values higher than 80%
- However, conventional private mortgage insurance can be cheaper than FHA mortgage insurance premium 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 30th, 2019 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, they 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 mortgage 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 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 2018 maximum cash out loan to value on refinance home loans:
- FHA will allow up to 85% 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 100% 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 is 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 faster response. Or email us at email@example.com. We have no mortgage overlays on FHA, VA, USDA, and Conventional Loans.