Mortgage Refinancing

With the Home Affordable Refinancing Program recently being extended until the last day of December, 2016, many homeowners who have found their assets in a challenging situation have been given a second chance to apply and receive an affordable mortgage.

By taking advantage of the HARP program, eligible borrowers can refinance to the current mortgage rates on their homes while avoiding paying for private mortgage insurance or putting down the principal.

A Quick Primer On The HARP Refinancing Program

With the economy in a strong downturn in 2008, the value of millions of American homes plunged and the owners found themselves owning property with negative equity.

The Home Affordable Refinancing Program was created by the government to assist people whose home values were lower than the outstanding balance on their mortgages. Previously it would have been impossible to refinance for a better interest rate on the current value of the home, so HARP was designed to help any of these borrowers stay above water.

Who Is Eligible For HARP Refinancing?

There is a certain set of criteria that needs to be met in order to qualify for the HARP refinancing program, but two major points stand out: The mortgage must have been granted earlier than May 31, 2009 and it must have been granted by either Fannie Mae or Freddie Mac.

It is important to point out that many banks do not back their own mortgages and work as a servicer, a middle-man to collect the mortgage that is actually backed by Fannie Mae or Freddie Mac. Many borrowers believe they do not qualify without double checking with their lender to see if the mortgage was granted by Fannie Mae or Freddie Mac, so it is imperative to contact the lender or check online to see who granted the mortgage.

There are also several disqualifiers that should be known. With certain exceptions, many borrowers who have previously refinanced their home under the HARP program are ineligible. The other major factor is that homes must have a loan-to-value ratio of 80% or higher.

What Is The Next Step For Eligible Borrowers?

The next step for anybody eligible for the HARP refinancing program is to check the current rates and see if refinancing would be beneficial. Your local mortgage professional will have experience with the HARP application process and will be able to confirm today’s rates to see if applying is the right move.

VA mortgages stand out as one of the biggest benefits to men and women serving in the military. Although private lenders make the loan, the Department of Veterans Affairs guarantees all VA mortgages, which is why these loans come with favorable terms and benefits not found with other mortgage types.

The Benefits Of Refinancing To A VA Mortgage

A VA loan may very well be the borrower’s only option for putting no money down, as many lenders will cover 100% of the value of the home, thanks to the backing of Veterans Affairs. There is a ceiling on the amount covered depending on the area of the country, so contacting a qualified VA mortgage professional is the preferred way to discover limits locally.

VA loans also require no mortgage insurance, cover many of the costs associated with closing or refinancing and, in many cases, have lower mortgage rates than comparable loans.

Veterans who had never considered a VA mortgage may wish to take advantage of the flexible terms and the favorable market to refinance their current mortgage into one that offers tremendous benefits.

Qualifying For A VA Mortgage

Veterans Affairs mortgages are limited to service men and women and their spouses, a benefit for serving their country. After a set amount of service time veterans are able to apply for a certificate of eligibility that will allow them to apply for the loan.

Those who are eligible include most military members in active duty, members of the National Guard, veterans both discharged and retired, military academy cadets as well as any spouse of a deceased serviceperson.

Eligible Homeowners Can Refinance Through Cash-Out Refinancing

The Department of Veterans Affairs considers a conventional mortgage to VA mortgage refinancing to be the same as cash-out refinancing and treats it accordingly.

This process is as intensive as an initial mortgage because it will replace the current mortgage altogether, so all applicants are expected to go through the standard credit and underwriting process.

VA loans are incredibly beneficial to current military members as well as retired veterans who may have never considered taking advantage of the program. Although the mortgage can cover 100% of the value of a home, the actual amount varies depending on the area. The only way to know for sure how much will be covered and whether it’s the right time to refinance is to contact a mortgage professional who has experience with VA mortgages.

Refinancing a mortgage can provide a homeowner with many benefits, and many are interested in refinancing their traditional mortgage into an FHA mortgage to take advantage of low interest rates. Depending on the specific circumstances, this step may lower the monthly payment, reduce interest charges, adjust the loan term so that it is more beneficial for achieving financial goals and more. Those who are interested in refinancing in an FHA mortgage may consider these steps.

Understand the Rules and Requirements

There are specific rules in place regarding refinancing under the FHA program. For example, the loan amount may be up to 96.5 percent of the value of the home, but the homeowner cannot take cash out of the refinance transaction. If cash is taken out, the loan-to-value limit under the FHA program is usually 86 percent of the property value. These limits are in place for loan amounts that are $417,000 and under. Loan amounts that are between $417,000 and $729,750 will fall under a different set of rules. Homeowners should be aware of these rules to ensure that the FHA program is the best fit for their unique goals.

Review Goals and Current Mortgage Details

The next step for homeowners to take is to review their own financial goals and to define their reasons for refinancing. In addition, it is important for homeowners to contact their current mortgage company to learn more about their current interest rate, if there is a prepayment penalty and the current loan balance. Estimating the property value is also important. Homeowners may have a reasonable idea about property value, or they can contact a real estate agent for a valuation. When all of this information is taken into account, the homeowner will have a better idea about what to expect from refinancing.

Each homeowner will be in a unique situation regarding current loan details, property value and goals that they want to achieve through refinancing. It can be confusing to decide if refinancing is the right move to make, and it can be even more complicated to determine which loan program is a best-fit for the goals of the homeowner. Those who are interested in refinancing from a traditional mortgage into the FHA loan program may contact a mortgage broker soon to discuss the options and to determine if this is a best fit option for them as a first step in the loan process.