Mortgage rates are still at historic lows, which is good news for many homeowners looking to refinance. This can benefit borrowers in many ways, such as lowering monthly payments or shortening a mortgage’s term to pay it off sooner, just to name two. Just like when applying for a mortgage to purchase a home, refinancing requires the submission of financial, employment and credit documentation, and also requires closing costs. Still, many homeowners see the benefits of refinancing, and how it can help them reach their financial goals.
If you are still wondering if refinancing is a good option for you, or trying to understand when is the “right” time, please read our top five benefits of refinancing your home:
- Reduce the monthly payment
This is the most common reason homeowners are looking to refinance, and we understand why! By refinancing at a lower interest rate than that of the original mortgage, monthly payments can reduce by a significant amount, saving a homeowner money in the long run.
- Pay off a mortgage faster
Some homeowners opt to refinance their home with a shorter term. This results in fewer monthly payments overall, so the mortgage is paid off sooner. While refinancing from a 30-year mortgage to a 15-year mortgage may result in higher monthly payments, it will also help a homeowner build equity in their property faster, and the shorter term will save money by reducing total interest paid over time.
- Make upgrades to a home
Did you know you can refinance to restore your home? A renovation loan gives homeowners a convenient, economical way to make renovations or repairs, and increase the value in their home through improvements, all in one loan with one monthly payment. This refinance option is available to borrowers of all income levels, on almost any type of property.
- Cash out some equity
When paying a mortgage, the first few years of payments go more towards the interest than paying down the principal. However over time, the mortgage payments will be directed more and more toward reducing the principal amount borrowed, thus building equity. Some homeowners choose to refinance and “cash out” this equity to pay for unforeseen financial needs.
- Reduce or remove mortgage insurance
Most homeowners, unless they put down a large deposit when purchasing their home, pay a monthly mortgage insurance. This is on top of their regular principal and interest paid. But for homeowners who have paid down a significant portion of their balance owed, refinancing can allow them to reduce or entirely remove their monthly mortgage insurance.
If you would like to see what you could specifically achieve by refinancing, please reach out to a Norcom Loan Officer today!
Recently, the Consumer Financial Protection Bureau issued an “Advance Notice of Proposed Rulemaking (ANPR) seeking information relating to the expiration of the temporary qualified mortgage provision applicable to certain mortgage loans eligible for purchase or guarantee by the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac...” The ANPR notes that the CFPB is planning to allow the temporary qualified mortgage provision, known as the GSE Patch, to expire in January 2021.
So, what does this mean? CFPB Director Kathleen L. Kraninger explains, “The national mortgage market readjusting away from the Patch can facilitate a more transparent, level playing field that ultimately benefits consumers through stronger consumer protection.” Furthermore, “With the large percentage of loans being sold presently to Fannie and Freddie in excess of 43% debt-to-income ratio [the threshold typically required for loans to obtain qualified mortgage status], the outcome of what will happen to the GSE Patch is very important to our industry” says Norcom Mortgage President, Phil DeFronzo.
To read more about this, please visit the CFPB’s press release here:
Spring is near and with the weather we’ve had, you would think it was already here. However, the spring housing market is just beginning and before anyone goes out looking for a home, consider getting pre-approved first. You might be wondering why getting pre-approved is so important. It’s actually surprising to know how many people searching for a home don’t bother getting pre-approved. They end up wasting their time which makes them put house hunting to the side because they realized what they thought they can afford, isn’t going to work. This is a type of issue where getting pre-approved can help you avoid altogether.
Getting pre-approved allows you to shop for a home with confidence. You will already know how much you can afford and your time won’t be wasted looking at houses that are way out of your budget. Norcom’s pre-approval program allows you to tackle the loan process before you even begin your hunt for a new home. This will give you complete confidence to shop in your price range and even allows the seller to feel confident knowing your offer won’t fall through when it comes time for closing.
When you have an idea of how much you can afford before buying a home, the search for a new place becomes a lot more exciting. You’ll know that every house you visit can potentially be yours. Your realtor will help you find the perfect house in your price range, which will end up saving you a lot of time and frustration that those buyers who don’t get pre-approved go through.
Online calculators can be deceiving. You might be able to get a rough estimate of what you can afford but it won’t be as accurate as getting an official pre-approval from your lender. Getting pre-approved gives you the confidence in knowing that your offer will be accepted on a house you dream of owning.
A pre-approval will verify not only your credit, but bank statements and tax returns as well. This is a crucial step when it comes to getting pre-approved because you and your realtor will know that the amount you get pre-approved for, is completely accurate. Knowing that your key information has been reviewed by an underwriter ahead of time will give you, and the seller, confidence that you’re offer won’t fall through.
The Norcom JumpStart pre-approval program allows you to tackle the loan process before you even start house hunting, so you can shop with total Norconfidence. Every JumpStart pre-approval is reviewed by an underwriter to prepare you for success and get you closer to finding the right home for you and your family.
Visit our website, https://norcommortgage.com/pages/jumpstart-pre-approval, to learn more about our program or you can call us today to get started!
Private mortgage insurance (PMI) is required by lenders when a homebuyer makes a down payment on their home of less than 20%. It is a type of insurance policy that protects the lender from losing any money if your home ends up in foreclosure. PMI is also required if you decide to refinance your home with less than 20% equity.
Borrower-paid PMI (BPMI) is when you have monthly PMI payments, you are required to continue paying PMI until your loan balance reaches 78% of the original value of your home. If you would like to cancel your PMI, you must obtain approval from your lender in doing so and your home must reach 20% of the purchase price or appraised value. It is also required to have adequate equity as well as a good payment history.
Single-premium PMI means that the premium is paid upfront in a single lump sum. This does not require any monthly payments and can be paid at full at closing or financed into the loan.
Lender-paid PMI (LPMI) is a permanent part of your loan. The cost of the PMI is included into the mortgage interest rate and allows for lower monthly mortgage payments. However, with this type, you will end up paying more interest in the life of the loan.
Payments for PMI can be avoided entirely if you originally make a down payment of 20% of the purchase price of your home.
The mortgage industry is full of acronyms, and when you aren’t familiar with the meanings, a conversation can sound like a foreign language. Don’t stress when you hear your loan officer say acronyms you do not understand; we’re here to help! Here is a list of common acronyms, and their definitions, so you can sound like a pro when applying for a mortgage.
FHA: Federal Housing Administration. The Federal Government Agency that oversees the US Housing Market. FHA mortgages are guaranteed by the Federal Government and offered by banks/lenders.
FICO: Fair Isaac Corporation. The company that created the industry standard credit scores used by almost all lenders. The FICO score is a numeric summary of the information in your credit reports that represents your potential credit risk.
APR: Annual Percentage Rate. The APR calculates the annual percentage rate you would pay on the loan once the costs of getting the loan are factored in.
ARM: Adjustable Rate Mortgage. An Adjustable rate mortgage is a mortgage that will have a fixed rate for a set period of time and then the rate is adjusted. The rate will normally be adjusted once or twice a year.
ECOA: Equal Credit Opportunity Act. A law in the U.S. that makes it illegal for any creditor to discriminate against any applicant on the basis of race, religion, national origin, sex, etc.
FHLMC: Federal Home Loan Mortgage Corporation. A corporation authorized by Congress to provide a secondary market for residential mortgages.
GFE: Good Faith Estimate. A GFE is a document that the lender is required to give a prospective borrower when they apply for a loan. The GFE is an estimate of all closing costs and fees required for the proposed mortgage loan.
GPM: Graduated Payment Mortgage. This is a type of mortgage on which the payment starts low and rises over time.
HARP: Home Affordable Refinance Program. HARP is a refinance program that allows eligible borrowers, with little to no equity in their homes, to take advantage of low interest rates and other refinancing benefits.
HELOC: Home Equity Line of Credit. HELOC is a loan in which the lender agrees to lend a maximum amount within an agreed loan term, where the collateral is the borrower’s equity in his or her house.
HUD: U.S. Department of Housing and Urban Development. HUD is the primary housing and lending regulatory authority in the U.S.
IRRRL: VA Interest Rate Reduction Refinance Loan. This refinance loan allows you to lower your interest rate on an existing VA home loan.
LTV: Loan-to-Value. LTV is a ratio used by the lender that divides the amount of money borrowed by the appraised value of the home expressed as a percentage. For example, a borrower may purchase a home appraised at $200,000 with a down payment of $40,000. This means he has a loan-to-value ratio of 80%.
P&I: Principal and Interest. Principal and interest are the two elements that go towards repaying your loan.
PITI: Principle, Interest, Taxes and Insurance. These are the four main components of your monthly mortgage payment. Principal is the loan amount. Interest is the rate at which the finance charge you pay for borrowing is calculated. Taxes are the real estate taxes for which you are responsible, and insurance is the homeowners insurance that your lender requires you to have.
PMI: Private Mortgage Insurance. If you put down less than 20% most lenders or banks require you to have private mortgage insurance. This can be put into your monthly mortgage payment or calculated into your rate.
TIL: Truth in Lending. TIL is an important document you will receive from the lender or bank within three days of your application. Within the document certain disclosures are set forth. Such as, finance charges, annual percentage rate (APR), amount financed, total of payments, and total sales price will be disclosed.
VA: Department of Veterans Affairs. This federal government agency guarantees mortgages that assist eligible veterans in buying homes.