30
Jan
By Fred Gruber
Home Financing Tips

Tips to Remember When Shopping for a New Home Loan

Finding a new home loan can seem challenging, but if you take the proper steps before you start applying for loans, you’ll have no difficulty finding a mortgage that works for you and a lender that would love to have you as a borrower. Shopping for a mortgage isn’t like shopping for a couch, and there’s a lot that goes into the process.

So how can you shop for your new home loan in a way that saves you time and gets you the best loan for your needs? Here’s what you need to know.

Research Loan Types
A lot of home buyers, especially first-time buyers make the mistake of not doing their research and not asking enough questions. A fixed-rate mortgage isn’t right for every homebuyer. Neither is an adjustable-rate mortgage. If you plan to stay, put in a home to raise a family, you might consider a 30-year loan.

Conversely, if you’re moving in 10 years or less, an adjustable-rate mortgage, or ARM, could better suit you. It’s advised that you research loan types then prepare a list of questions to ask your mortgage agent to ensure you select the loan that’s best for you.

Get Pre-Qualified Before You Start Looking
It can be tempting to start looking for mortgages online and start seeing what kinds of rates and limits you can afford, but if you start your mortgage hunt with Internet window-shopping, you may end up sorely disappointed. A pre-qualification is a vital first step that can help you to find the mortgage that works best for you. With a pre-qualification, you’ll have a good idea of what you can reasonably afford to spend on a home, so you won’t waste time viewing homes that are outside of your price range.

Hold Off On Major Life Changes Until You Have Your Mortgage
Once you’ve been pre-qualified and pre-approved, the next step is the approval process, the part of the process where the lender you’ve chosen evaluates your application and decides whether or not to lend to you. One mistake that a lot of homebuyers make is allowing significant changes in their income to happen during the approval process. If you quit your job to start a business, or if you go down to part-time hours so you can spend more time with the kids, your lender will need to start the approval process again with your new financial information in mind, so hold off on any big changes until you’ve been approved.

Finding a new home loan can seem like a challenge, but a qualified mortgage advisor can help. Contact your local mortgage professional to learn more.

24
Jan
By Fred Gruber
Mortgage Tips

How to Refinance Your Mortgage

Refinancing your mortgage can be a strategic financial decision, enabling you to save money, access home equity, or adjust your loan terms to better suit your current financial situation. Here’s a detailed guide to help you understand the process and determine if refinancing is the right move for you.

What is Refinancing?

Refinancing involves replacing your existing mortgage with a new one, often with the goal of:

  • Securing a lower interest rate.

  • Adjusting the loan term, either shortening or extending it.

  • Switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan for more predictable payments.

  • Accessing home equity for major expenses like renovations, education, or debt consolidation.

It’s important to clearly define your financial goals before starting the refinancing process.

Steps to Refinance Your Mortgage

1. Review Current Interest Rates

One of the primary reasons homeowners refinance is to take advantage of lower interest rates. Even a small reduction in your rate can lead to significant savings over the life of your loan. For example, lowering your rate from 5 percent to 3.5 percent on a $250,000 loan could save you over $200 a month.

2. Evaluate Your Financial Health

Lenders will assess your financial profile to determine your eligibility for refinancing. Key factors include:

  • Credit Score: A strong credit score (typically 700 or higher) can help you qualify for the best rates.

  • Debt-to-Income (DTI) Ratio: Lenders prefer a DTI ratio under 43 percent, showing you can manage additional debt.

  • Home Equity: Most lenders require at least 20 percent equity in your home for a traditional refinance.

3. Compare Lenders and Offers

Not all lenders provide the same rates or terms, so it’s essential to shop around. Some lenders might offer lower closing costs, while others may provide better interest rates. A mortgage broker can help compare multiple options to find the best fit for your needs.

4. Understand the Costs

Refinancing comes with upfront expenses, including:

  • Closing Costs: These typically range from 2 to 5 percent of the loan amount.

  • Appraisal Fees: A new appraisal may be required to determine the current market value of your home.

  • Prepayment Penalties: Check if your current mortgage has fees for paying off the loan early.

Ensure that the potential savings from refinancing outweigh the costs. A good rule of thumb is to refinance if you plan to stay in the home long enough to recoup these expenses.

5. Gather the Necessary Documentation

To streamline the application process, have the following documents ready:

  • Pay stubs and W-2 forms or tax returns.

  • Recent bank statements.

  • Proof of homeowners insurance.

  • Information about your current mortgage.

6. Close the Loan

Once approved, you’ll finalize the new mortgage by signing the loan documents and paying any applicable closing costs. Your new lender will pay off your old mortgage, and your refinancing journey will be complete.

Benefits of Refinancing

Refinancing can offer several advantages, including:

  • Lower Monthly Payments: Reducing your interest rate or extending your loan term can make monthly payments more affordable.

  • Faster Loan Payoff: Switching to a shorter loan term allows you to pay off your mortgage faster, potentially saving thousands in interest.

  • Access to Equity: A cash-out refinance can provide funds for major expenses or debt consolidation.

Is Refinancing Right for You?

Refinancing can be an excellent financial tool, but it’s not suitable for everyone. Consider factors such as your financial goals, the costs of refinancing, and how long you plan to stay in your home.

Give us a call to explore your options and determine if refinancing is the right choice for your situation.