Selecting The Best Mortgage Rates When Refinancing

Selecting The Best Mortgage Rates When Refinancing

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About Selecting The Best Mortgage Rates When Refinancing 

Selecting the best mortgage rates can be challenging but will be worth the time invested for a home purchase mortgage loan borrower as well as refinance borrowers.

  • Mortgage rates vary depending on a mortgage loan borrower’s credit scores, debt to income ratios, and loan to value
  • Mortgage rates also vary from the various different mortgage loan programs such as VA, FHA, USDA Loans, Non-QM, Conventional, Jumbo, and Adjustable Rate Mortgages
  • Mortgage rates also differ from 30-year fixed rate, 15-Year fixed rate, and adjustable rate mortgages
  • Depending on your goals and how long you intend to live in your home, selecting the best mortgage rates can be simplified with the advice of your mortgage loan originator

Selecting The Best Mortgage Rates And Program For Your Needs

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There are many mortgage loan products in the market today that you might qualify for:

  • However, the question is what is the best mortgage product for your needs and goals and going about selecting the best mortgage rates for you
  • The best way to go about in selecting the best mortgage rates is by starting to eliminate the mortgage loan programs that you do not qualify for
  • For example, if you had a foreclosure three years ago, you cannot qualify for a conventional loan
  • This is because the waiting period to qualify for a conventional loan after a foreclosure is 7 years from the recorded date of the foreclosure
  • However, with a regular foreclosure, you can qualify for an FHA Loan, VA Loan, and USDA Loan

Borrowers can weigh their options with these three mortgage loan programs. They can see which loan program you qualify for and see the types of options these programs offer in selecting the best mortgage rates.

FHA Mortgage Program And Rates

FHA Loans offer one of the best and most flexible mortgage loan programs for first time home buyers as well as home buyers with prior bad credit and recent bankruptcy or foreclosure.

  • A home buyer can qualify for a FHA insured mortgage loan with a 580 FICO credit score and a 3.5% down payment
  • Home buyers who had a prior bankruptcy and the bankruptcy discharge were seasoned for at least two years can qualify for a FHA loan
  • Home buyers with a prior foreclosure, deed in lieu of foreclosure, or short sale can qualify for a FHA loan after 3 years from the recorded date of the foreclosure and/or deed in lieu of foreclosure or the short sale sales date reflected on the HUD settlement statement
  • Mortgage rates for FHA loans are lower than conventional mortgage rates
  • However, FHA has mandatory upfront and annual mortgage insurance premium
  • The upfront FHA mortgage insurance premium is a one time fee of 1.75% which can be rolled into the loan
  • There is a mandatory 0.85% annual mortgage insurance premium for all 30-year fixed rate FHA loans that can be quite costly
  • A home buyer can actually have a higher monthly housing payment with a lower interest FHA loan compared to a higher interest conventional loan due to the hefty FHA mortgage insurance premium

Home buyers should definitely compare which mortgage program is better and less costly for them and compare both FHA loans to compare loans.

VA Mortgage Loan Program And RatesFHA Mortgage Program And Rates

The United States Department of Veteran Affairs offers qualifying members of the United States Armed Services with a valid Certificate of Eligibility (COE) VA loans:

  • VA Loans enables them to purchase a home with 100% financing where no money down is required.  There is a funding fee but the VA funding fee can be rolled into the VA loan
  • There is no monthly mortgage insurance required on VA mortgage loans like there is for FHA loans
  • VA loans normally offer lower mortgage rates than FHA mortgage rates
  • VA mortgage lending guidelines are lenient than FHA loan programs

If you qualify for both VA and FHA loans, you can compare and shop which program is better for you in selecting the best mortgage rates.

Conventional Mortgage Loan Programs

Conventional mortgage loans are called conforming loans due to the fact that it needs to conform to mortgage lending guidelines set by Fannie Mae and Freddie Mac.

  • Conventional loans have much tougher mortgage lending guidelines than FHA, VA, and USDA Loans
  • Conventional loans have higher mortgage rates than government loans
  • The minimum credit scores required to qualify for a conventional mortgage loan is 620 FICO
  • Conventional borrowers with lower credit scores will get much higher mortgage rates
  • A 620 FICO credit score is considered pretty low for conventional loans
  • Borrowers with a 620 FICO credit score will pay the highest available conventional mortgage rate
  • To get the best conventional mortgage rate, the loan applicant should have credit scores of 740 FICO or higher

With conventional loans, the more down payment a home buyer puts down or the lower the loan to value for refinance borrowers, the lower the mortgage rate.  In selecting the best mortgage rates, it may be more beneficial for you to get an FHA loan versus a conventional loan if you have lower credit scores.

USDA Mortgage Loan ProgramsUSDA Mortgage Loan Programs

The United States Department of Agriculture offers USDA mortgage loans:

  • Also called Rural Development loans, USDA is for qualified home buyers which enable them to purchase a home in rural and suburban areas selected by the United States Department of Agriculture
  • USDA Loans offers 100% financing with no money down
  • The home needs to be in a USDA area and there is a restriction on the maximum household income

Non-QM Loans Versus Government And Conventional Loans

Gustan Cho Associates offers Non-QM Loans. Non-QM Mortgages have no mandatory waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. Late payments in the past 12 months are allowed with Non-QM Loans. 10% to 20% down payment is required. There is no private mortgage insurance required. There is no maximum loan limit on Non-QM Mortgages. Non-QM Mortgage Rates are higher than government and/or conventional mortgage rates.

Related> How to choose a mortgage lender

Related> Choose the right type of home mortgage loan that makes sense to you

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