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Mortgage Advice: Should You Refinance?
These are a few good reasons to refinance your mortgage.
Your mortgage is probably one of your biggest monthly expenses, so refinancing is tempting. It could help you save money each month, get a lower interest rate to save over the life of your loan, and free up money for other, more fun pursuits. Not everyone should refinance, though. Should you?
There are a few great reasons for working on your mortgage. Here’s my mortgage advice on when you should refinance.
- You can get a lower rate. Keep in mind that when you refinance, you’ll have to pay closing costs all over again. It’s worth it to take those on if you can save 2 percent on your interest rate. Talk to your lender and see how much you could shave off your rate before you commit to refinancing.
- You can slash your loan life. Even if you can’t minimize your monthly payment, shortening the duration of your loan is well worth it. Just think, if you could be free of your mortgage payments in 10 years instead of 12, that gives you two extra years of cash to put towards home improvements, retirement, or fun!
- You need to pull our equity. If you have debts other than your mortgage that are weighing on your family, refinancing can be a great way to free up the equity you’ve built in your home to pay off those outstanding amounts.
Instead of working on your mortgage, you could simply sell your house and buy another one that better suits you. To learn how selling your Los Angeles, Santa Monica, San Fernando or Conejo Valley, or Beverly Hills home could help you get into the right house with the right mortgage, contact me, Betsy Dittman. As a real estate expert, I’m more than happy to offer my advice to you.
How to Beat 4 Mortgage Obstacles
Do not let common roadblocks affect your mortgage.
Applying for a home loan requires a tremendous amount of documentation and it can be challenging to keep on top of all the paperwork. You can expect to show everything from full tax returns, pay stubs, bank statements, credit reports, debt, income, and assets. With such an extensive look into your monetary history, this can leave you vulnerable to obstacles in your mortgage application process. Here’s how to beat them:
- Changes in Income
If the underwriter at the loan company determines that your income is lower than what the loan originator said it was, you can provide a written verification of employment. This breaks down your wages and is especially helpful if you are an hourly employee with fluctuating income from bonuses and overtime. Lenders normally require two years of consistent income history when reviewing a loan application for approval.
- Too Much Debt
If your debt-to-income ratio is too high, you may need to reevaluate the mortgage that you are applying for. You can also reduce the payment on your mortgage, reduce or remove payments on consumer loans, or reconsider the income. Your debt-to-income ratio should not exceed 45% in order to qualify.
- Paying Debt Off Incorrectly
When your credit card payments are paid off, you can reduce your payment-to-income ratio. When you pay off consumer debts to qualify for a mortgage, the accounts must be closed as well, which may have a negative impact on your healthy credit score. A good option is to obtain an updated credit report and make sure that each creditor that you have paid off reports to the credit bureau a zero balance and payment due.
- Negative Events on your Credit Report
If you have had a short sale within the past four years, it could stop your conventional loan in its tracks and you would have to apply for an alternative loan such as an FHA . Be sure to check your credit report to remove any anomalies. If you have issues in regard to your loan application, make sure you contact your loan officer immediately to explain the situation and resolve any issues that could impact the loan process.
Now that you successfully have a mortgage in hand (with the help of these useful tips!), you can finally purchase that dream home in the Los Angeles or Conejo Valley area. Contact me, Betsy Dittman, to find your dream home in California!
