Home > Mortgage Loans > Mortgages Streamline Financing: Almost Similar to A Pay Hike
Mortgages Streamline Financing: Almost Similar to A Pay Hike |
|
When your mortgage payment is cut by even $50 a month through mortgage refinancing program, it makes a notable difference: it's like a pay raise. All the more so for first-time homeowners, a majority of them with loans backed by the Federal Housing Administration. Many consumers of FHA loans stretch finances to the limit to buy a house, struggling every month for mortgage payment. Many are unaware of the FHA offer of streamlined mortgage refinancing package designed specially for lower monthly payments. It can't be used for bill consolidation or for cash out of home equity. The two major requirements are an FHA loan and up-to-date payments as delinquent mortgage cannot be refinanced. Two key considerations in mortgage refinancing are loan costs and interest rates. Despite advertisers' claims, a no-cost loan is non-existent. It merely means no immediate or out-of-pocket costs; you still pay for the loan. There are also loan origination fees, charges for documentation and cost of credit reports. Inspectors have to be paid, apart from various taxes, filing and professing fees. FHA streamline refinancing offers several advantages. Neither appraisal, credit check, income verification is necessary nor underwriting fee. Face-to-face meetings are not required either. The loan cost is based on the size of the loan and the source. States have specific tax and fee structures. Even neighboring municipalities in one state may differ in costs of buying a home and registering the deed. In comparing two or three loans for mortgage refinancing, the lender's charges are the main difference in costs. Always request and scrutinize the Good Faith Estimate: the mandatory legal requirement of every lender before committing to any refinancing loan. Talk to several lenders for a Good Faith Estimate from each to compare them. On finding out final costs, there are three options for payment. The simplest is writing a check for the loan costs with available cash. Otherwise there are two alternatives for elimination of out-of-pocket expenses. One is to add the loan cost to the loan balance. The other involves a slightly higher interest rate. Both options require you to be aware of the long-term costs and the best one suited to your situation. Take a typical example of mortgage refinancing: refinancing $100,000 at 5.5%. Basic monthly payment of principal and interest will be $567.79, excluding taxes, insurance and assessments. Cost of the loan could be $2,500 that you want to add to your loan balance increasing the amount to $102,500. A 5.5 interest makes the payment $581.98. Thus, for an extra $14.19 a month, the saving is $2,500 cash. Now, take a lender paying all costs but charging with a slightly higher interest rate. Instead of $567.79 monthly basic payment on a 5.5% mortgage, one eighth of a percentage point more or 5.625% on mortgage refinancing. The higher rate increases monthly payment to $575.66, with $7.87 being extra every month. Raising the rate to 5.75% requires a monthly check of $583.57, resulting in an extra $15.78. The second consideration in mortgage refinancing is what your new interest rate will be, based on your credit rating. Mortgage rates have been low for a while but only for those with good credit. The ones qualifying for paper loans get mortgages below 6%, less-than-perfect credit history requires over 7% to get a mortgage. Consider also the change in credit situation since the time of getting the original loan and its impact on your new rate. Always having good credit with a 5.75% mortgage a year back would make 5.5% refinancing unwise. But an FHA mortgage at 7 or 8% due to poor credit at the time of buying the house could make mortgage refinancing worthwhile with improved credit. This qualifies you for a lower interest rate. Taking time to think about potential savings could result in a hefty payback. Refinancing FHA mortgage can feel like a pay raise, without having to ask your boss for it. |
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
|
|
|
|
| ------------------------ |
|---|
|
| ------------------------ |
|---|
Custom Search
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
Consumer Alerts | About | Bookmark Us | Contact | Espanol | Privacy Statement | Copyright | Terms & Conditions | Financial Widgets | SiteMap
Copyright © 2006 Credit Loan, LLC. 235 APOLLO BEACH BLVD, STE 218 Apollo Beach, Florida 33572 All rights reserved.
Disclaimer: The content provided on CreditLoan.com is for informational purposes only; do not make any financial decisions based on its content. Financial decisions are personal, based on an individual's situation. Consult with a financial professional before making any financial decisions. CreditLoan.com is not liable for your financial actions.
