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.
For first-time homebuyers, coming up with the funds for the down payment on a house can be the biggest challenge. Gathering the right amount of money can take a lot of responsibility, effort, and most of the time, patience. Many first-time homebuyers are dealing with many other expenses, such as rent and school loan payments, which can make it difficult to save. So what are some ways to help you work on saving that down payment?
Learn how much you will need to pay
There are many different loan types available, which offer different down payment amounts to homebuyers. Have a lender educate you on the different programs and see what works best for you. Knowing an estimate of what your down payment may be is a great start to help you set up a savings plan.
Cut down on household expenses
Making small changes at home can help you save money each month. Electronics that are plugged in can use up energy even when they are not in use. Start unplugging cell phone chargers, stereos, or other electronics when they are not in use to save on energy bills over time. Another big way to save is by cutting down your cable costs. There are much more affordable options now that most of TV can be found online or with a service such as Netflix. If you can’t bear to ditch your cable company, consider lowering your plan to incorporate fewer channels. After all, how many channels do you actually end up watching every month?
Use a gift from family members
Some mortgages allow you to use a gift from family members toward your down payment on a house. You will need to provide a gift letter stating that you do not have to pay back whoever gave you the money, as well as copies of checks or money wires to your lender. Receiving gifts has become especially useful after the economy’s downturn, and a study done in 2012 revealed that almost 25% of first-time homebuyers received used a gift toward their mortgage from 2011 to 2012.
Save an affordable amount each week
Saving a little at a time is easier than trying to set aside large sums of money all at once. Make sure you have a set amount you put into savings each paycheck you receive. It may take more time to save this way, but saving a little at a time makes it manageable when balancing the other expenses you have.
Cash out some of your IRA
Did you know that first-time homebuyers can cash out up to $10,000 from an IRA account for a down payment on a house and avoid paying the early withdrawal fee? If you are married this means you can cash out up to $20,000 for the down payment. The great thing about doing this is you do not have to be buying your very first home to qualify for the exemption, as long as you or your spouse do not, or have not, owned a principal residence at any time during the previous 2 years.
Keep track of your progress
Be sure to keep track of your progress to know where you stand with your savings. Sometimes seeing the numbers increase can help you stay on track. You can make your own graphs or use a goal-setting program such as the one offered by Mint.com. Any extra motivation to help you continue saving could end up being a big help.