When it’s time to refinance your home, understanding where to start and the exact steps to take can be daunting. If you’re unsure how to refinance your home, it can be tempting to pick the first action plan and end up paying for longer than you need to just to get a lower payment. Going into the process of refinancing fully prepared will keep your confident with what you want and help you make sure that your refinancing fits your goals while staying manageable for your income.
Your goal in refinancing should be to either shorten or maintain the current term of your home loan, while also lowering the rate of your interest. For example, stay you start out with a loan of $200,000 and an fixed rate of 6%, to be paid off over 20 years. The goal of refinancing is to switch out those terms, and come up with something better. For example, the goal of the refinancing would be the same, $200,000 loan, but with a fixed rate of 4% to be paid off over 10 years.
When you get ready to refinance your home, make sure that you know what your credit score is. If your credit score is a little on the low side, you may want to wait to refinance. The better your credit score is, the lower your interest rates will be when you refinance your home.
Before going in, you’ll need to know your home’s current value. Websites like Zillow are perfect for this. For example, you can search the average home value in any county. Take Prince George’s County in Maryland. You can see here the average home value in Prince George’s County. You can do this for any county that you live in. You can see the average rates for other counties, like Anne Arundel County and Baltimore County. This is a good resource, no matter where you live. Once you know your home’s current value, you can start searching for the mortgage rate that will best suite you. You can do this easily online.
Make sure you have all of the necessary documents and paperwork. Even though it can be a time consuming process, you’ll be glad that you put in the effort. Gather up your bank statements, W2s, and check stubs so that you have everything on hand that your lender might need when it comes time to getting your new interest rate.
Remember: refinancing your home can include an array of upfront costs, such as application fees, fees to process documents, and even a charge to run your credit report. Make sure you have the money set aside for the cost of beginning to refinance your home, not just the money you’ll need to start making payments. You’ll also want to make sure you have money set aside for closing costs. Once you’ve decided and settled, you’ll likely need to pay for even more costs at the end of the experience as well.Read More
Your home is more than the place you raised your family, it is also one of the largest investments you own. When it is time to sell you deserve the best return possible, but is a real estate agent worth those huge commissions? For the right one – yes!
So does that mean you need to pay 7% commissions to an agent? Not if you pick carefully. Commissions are negotiable, but sometimes lower fees can mean less service as well. Are they willing to accept a flat fee versus a commission? Will they reduce their rate if you conduct your own open houses?
Treat hiring a real estate agent like any other job interview. No matter what market you live in, there are lots of agents competing for your business. Interview at least three or four as you would for any contractor. Before you meet with them, review the quality of their current listings and call some owners from their recent sales. Review the time on market for their listings, and the percentage of selling price compared to the listing price.
All agents will offer some of the basic services, but what more will they do for you? Have them describe their marketing plan. How will they provide maximum exposure for your property? They need to be more creative than simply listing on MLS. Will they assist in staging your home? Do they use professional photographers? How many websites, and other advertising mediums will they use? How many open houses will they conduct? Will your home be a priority over their other listings?
The first item on a real estate agent’s agenda is the appraisal. It is often tempting to sign on with the agent who promises you the highest listing price, but is their valuation realistic in your market? Have them show you comparable listings and recent sales in your marketplace. How knowledgeable are they about those listings? Can they accurately compare the features of those homes versus yours?
The worst thing an agent can do for you is to overprice your house. In these instances, the house doesn’t sell, so you lower the price. Now it has been on the market longer than desired and people will think either there is something wrong with your house, or you will be open to a lowball offer. In this way overpricing may ultimately lead to a lower sale price!
Time spent in carefully selecting your agent will always be a good investment.Read More
Your home is probably the largest purchase you will make — and you will do it with debt.
A mortgage is a loan used to buy property. Because it’s for such a large amount, you want to make sure you’re getting the best mortgage rate and working with a lender that offers the best possible terms.
Before you apply for a mortgage, do a little shopping around to see if you can find a mortgage company that fits your needs and can work with your situation. Here’s how to get a mortgage loan with the right lender for you.
1. Understand your credit situation
Your credit is the most important factor lenders will consider, and some lenders won’t work with you unless you have a certain credit score. Before you start the mortgage process, it helps to know where you stand.
You might discover that you need to work with a mortgage company that accepts alternative credit reporting. Perhaps you need to focus on a lender that offers FHA loans because your credit score is too low for a conventional mortgage.
Be realistic about what to expect based on your credit score, and plan accordingly.
2. Don’t forget community banks and credit unions
Too often, we go right to the “big guys.” However, a lot of community banks and credit unions are willing to work with you. These smaller institutions sometimes service their own mortgage portfolios instead of selling them to bigger banks or investors.
As you shop around for the best mortgage, don’t neglect the local players. You might be surprised at what they can do for you, especially if you have taken the time to build good credit.
3. Look online for a mortgage company
The internet offers unlimited possibilities when it comes to information, products, and services. When I bought my house several years ago, I went through a broker at a local community bank. I was wary of using the internet for such a big transaction.
Today, the internet is a secure place to find a mortgage lender. You can visit an aggregator, share your information, and receive several quotes back. It makes it easy to compare your interest rate options and see other terms.
Even though I was reluctant to use the internet when I bought my home, I changed my tune a few years later when it was time to refinance. My refinance was handled almost entirely over the internet after I found the right solution in an online mortgage.
4. Compare mortgage rates and terms from several companies
You shop around for the best price on a TV. Why wouldn’t you shop around for the best rate on something worth 100 times more than your TV?
Get some quotes for an online mortgage, then bring that information to two or three lenders in your hometown. In some cases, local lenders can meet or even beat what you see online. If you’re interested in more personal service and dealing with large numbers in person, this is a good way to try to get the best terms.
5. Look for a lender that understands your situation
As you compare mortgage companies, find out they have the right options for your situation. If you have a low down payment, for example, you have different needs from someone who can put 20 percent down.
Be upfront about your situation and your challenges. Ask potential lenders questions about your financial situation, and what they can do for you. See how knowledgeable they are about programs specifically designed to help your circumstances, whether you are a first-time homebuyer or someone with an unconventional credit situation.
6. Ask a lot of questions and read the fine print
Take a close look at the mortgage company and what they expect. Find out about any fine print, and ask a lot of questions.
Many of us don’t like to look as though we don’t know what we’re doing. However, if you don’t know what you’re doing as a borrower, it could be extremely costly down the road.
Don’t be embarrassed to ask questions. If someone makes you feel stupid because of what you’re asking, they aren’t the right lender for you. Look for someone patient and willing to explain.
Clarify any terms you don’t understand. Also, find out if the lender requires an “earnest money” payment before starting — and if the lender keeps that money even if the loan doesn’t go through. (Hint: If they are vague about what happens to the earnest money, or if they keep it, consider going elsewhere.)
7. Make sure to compare apples to apples
As you shop around for a mortgage lender, be sure you are comparing apples to apples.
Match up interest rates and other terms, and make sure that your quote for interest rates are on the same types of loans. It’s not uncommon for a newbie to look at a 15-year variable rate from one lender and not realize they are comparing it to a 30-year fixed from another lender.
Be clear about matching up the types of loans available. Go in with some idea of what you want, and take notes. Ask for a print-out of the terms that you can take with you and use in your comparison.
The right mortgage company can make a huge difference in your borrowing experience. Whether you get an online mortgage or go the more traditional route, you want a lender that works for you — and offers you the lowest possible rate.Read More
If you have missed more than three mortgage payments, or your lender has filed a Notice of Default (NOD), you might think the loss of your home is inevitable. Even at this stage, there are five strategies you can use to stop foreclosure in Maryland.
Foreclosure Workout. Up until the time your home is scheduled for auction, most lenders would rather work out a compromise that would allow you to get back on track with your mortgage than take your home in a foreclosure.
Short Sale. After your lender files an NOD but before they schedule an auction, if you get an offer from a buyer, you lender must consider it. If they foreclose on your home, the lender is going to simply turn around and try to resell it; if you present them with a reasonable short sale offer, they may see it as saving them the time, effort and trouble of finding a qualified buyer in a soft market. So, if your home is on the market, continue to aggressively seek a buyer for it, even after your lender initiates the foreclosure process. Read our guide on How to Sell Your Home Fast When Foreclosure Looms for action steps you can take to unload your home fast, then make your best pitch as to why your lender should agree to the short sale.
Bankruptcy. Bankruptcy stops foreclosure dead in its tracks. Once you file a bankruptcy petition, federal law prohibits any debt collectors, including your mortgage lender, from continuing collection activities. Foreclosure is considered a collection activity, and so the day your lender becomes aware that you have filed for bankruptcy, the foreclosure process will effectively be frozen. But here’s the rub; once you get to court, the bankruptcy trustee’s role is simply to play referee or mediator between you and your creditors. Bankruptcy really just buys you more time to replace your lost job or recover financially from a temporary disability; it doesn’t let you off the hook for your debts. The law requires your mortgage company and other creditors to work in good faith with you to formulate a reasonable repayment plan so you can get back on track. Consult with a bankruptcy attorney regarding whether filing for bankruptcy is a good strategy for you.
Deed in Lieu. A deed in lieu of foreclosure is exactly what it sounds like. The homeowner facing foreclosure signs the deed to the home back over to the bank — voluntarily. This sounds like it would be a great option, but actually has the same impact on a homeowner’s credit that foreclosure does. Lenders are very reluctant to agree to take a home back through a deed in lieu of foreclosure for a number of reasons: They fear the homeowner will sue later alleging they didn’t understand what was happening, the lender must pay any second or third mortgages or home equity lines of credit (HELOCs) off before executing a deed in lieu, and the lender wants to be certain that the borrower’s financial distress is real. Allowing the foreclosure process to proceed is one way the lender can be sure the borrower is not faking poverty.
As such, a deed in lieu of foreclosure is virtually never granted unless: foreclosure is imminent; the owner has had their home on the market for several months and been unable to sell it; there are few or no junior loans or liens the lender will have to pay off; the seller can document their financial hardship; and the seller initiates the process and documents the voluntary nature of their request for a deed in lieu. Even when all these factors are present, many lenders will not agree to a deed in lieu, but it is worth a try!
Assumption/Lease-Option. Most loans these days are no longer assumable. The average mortgage now contains a “due on sale” clause by which the borrower agrees to pay the loan off entirely if and when they transfer the property. However, if you are facing foreclosure, you might be able to persuade your lender to modify your loan, delete this clause and allow another buyer to assume your loan. The lender may want to assess the new buyer’s qualifications, but it can be a win-win-win option for all. You might be able to negotiate a down payment from the buyer which you can use to pay off your outstanding past due mortgage balance.
In a lease-option scenario, the buyer becomes your tenant, and you continue owning the property until the buyer has saved enough down payment money, improved their credit sufficiently or sold their other home. In some situations, the buyer will make a one-time, lump option payment upfront, paying you to obtain the option to purchase your home. You can apply the option payment to bringing your mortgage current. Then, the buyer will make lease payments monthly which you, the seller, then apply to your mortgage. To successfully use a lease-option to stop the foreclosure process, you must negotiate lease payments that cover most or all of your mortgage payment, property tax and insurance obligations — enough that you can make up any difference and still pay to live somewhere else.Read More