Refinancing requirements: everything you need to know to refinance your home. – Part 3

By Manuel Tovar, June 9 – Hispanic Solutions Group

Our specialists Hispanic Solutions Group, talk about refinancing a home and basic refinancing requirements (see part 1 / see part 2). Likewise, they continue to inform about the requirements to verify the eligibility of this.

6. Cash to close.You can expect the refinancing fees to be similar to what you paid on your current mortgage. Refinance closing costs often range from 2% to 5% of your loan amount. Once again, Streamline Refinances is known to be an exception. They tend to be significantly less expensive after closing, as certain costs such as appraisal are generally not charged.

Refinancing without closing cost. Especially with refinances, you may be offered ways to avoid closing costs. And there is nothing wrong with that. But you need to understand that, in the long run, you may end up paying more than if you had paid closing costs up front. On the other hand, zero closing cost refinances come in two main types:

  1. Transfer closing costs to your loan balance – you’ll pay them, with interest, as long as you keep the new loan (up to three decades)
  2. Accepting a ‘Lender Credit’ – This means that your lender pays the costs and charges you a slightly higher interest rate in return. That higher rate will likely cost you much more than the original rates if you keep the loan for the entire term

If you don’t have cash now, you may see them as an affordable way to get the refinance you need quickly. And that’s okay. As long as you know the cost versus the benefit. And remember, the requirements vary by lender.

When applying for a refinance, it is important to understand the differences between lenders and loan programs. This knowledge can make or break your application.

A loan program is the type of mortgage you are applying for. Agencies that regulate mortgage programs, such as Fannie Mae, Freddie Mac, FHA, VA, and USDA, can set minimum requirements for refinance applicants. For example, Fannie and Freddie require a FICO score of at least 620 to refinance a compliant loan, while the Federal Housing Administration only requires a score of 580 for an FHA refinance.

Mortgage lenders must follow the minimum guidelines set by these agencies. But lenders are also free to set their own higher standards, both for the borrower and for the property. And many do. For example, the Department of Veterans Affairs does not have a minimum credit score to refinance a VA loan. But many VA-approved lenders look for a score of 620 or higher. Therefore, just because a certain program allows a low credit score or high DTI does not mean that an individual lender will necessarily approve it.

So the good news is, you don’t have to refinance with your current lender. You can apply with as many mortgage lenders as you want and find one whose mortgage rates and standards meet your needs. Shopping could be the difference between qualifying to refinance or not. And it could save you thousands of dollars in the long run.

Check out your refinance rates. All the rules set out above can seem intimidating. But many homeowners successfully navigate the refinancing process. And many are eligible for refinancing, but don’t know it yet.

Even refinancing can be worth it even if you’ve already refinanced it in the last two years. Freddie Mac recently reported that of all homeowners who refinanced in 2020, 10% did so more than once in a 12-month period. So many users wonder, how scary can refinancing be if so many homeowners refinance at least twice in a year?

Ultimately, the key is to know your loan options, shop around, and find the best rate to maximize your savings.

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