Ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least one point below your present one? That may have been valid years ago, but with refinancing dropping in cost over the last few years, it's a good time to think about a new mortgage loan! A refinance can be worth its cost many times over, factoring in the advantages that may come, as well as a reduced interest rate.
You may be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a new mortgage. You may also have the option to "cash out" some of your equity, which you can use to take care of higher interest debts, make home improvements, or take a vacation. You might be able to refinance to a shorter-term mortgage, giving you the ability to build up your equity faster.
All these benefits do cost something, though. When you refinance, you are paying for many of the same things you paid for during your current mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
You might look into paying discount points to receive a lower interest rate. The money you'll save over the life of the mortgage might be substantial and any paid points can be deducted on your taxes. Please talk to a tax professional before acting.
Speaking of taxes, if your interest rate is reduced you will also be lowering the paid interest amount that you can deduct from your federal income taxes.. Call us at 678-467-2330 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance are quickly recouped in monthly savings. ll work with you to find out which mortgage program is perfect for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing will impact your taxes.
Whether you're anticipating a total solar eclipse or a future home, both require preparation to get what you want out of the moment and save yourself from future headaches.
Here are two scenarios where I typically offer advice when given the time (61-90 days) to make the loan happen.
You're self-employed.; Move the money you are using for the purchase of a home to your personal account. If you have down payment in your business account, you can use it; however, the lender will want to "source" the funds in your business account(s). This means if there is anything private, like account numbers or client names in the bank statements, you may be revealing more than you desire. By having the funds transferred to your personal account more than 60 days before you go to underwriting, lenders can stay out of your business.
You're getting a gift for the down payment. If they love you enough to give you the money, perhaps they trust you enough to give that money 61 days ahead of underwriting. Of course, gifts are allowed on many loan programs if the transfer is documented and you have a gift letter; however, if the funds are already in your account for two months, the money is no longer considered a gift. This actually improves your qualifications in underwriting because a loan using your own funds for the down payment is considered a less risky than a loan with gift funds. If it is yours for 60+ days, it is no longer a gift.
As a last tip, I offer Fully Underwritten Loans WITHOUT a contract. In other words, we can turn your offer into the equivalent of a full cash offer pending the appraisal and title work. This is a powerful option at your disposal for those hard to obtain homes. Please let me know if I can help you purchase a home in Georgia.
*Eclipse photo taken near Dillon, GA on August 21,2017 using Canon Rebel T6, 300mm lens.
Below you'll find a list of actions to avoid during this critical time of your home purchase. Many of these come from real situations. Don't be an honorable mention here!
Don't buy big-ticket items. It doesn't matter if they are on sale because you won't have anywhere to put them if your loan is declined. This includes appliances, electronics, vacations, cars or expensive furnishings. Just hang on, or call me first so I can talk you down.
Don't go job hunting. Consistency in your career history is a good thing to lenders. However, switching jobs in the middle of the approval process may affect your approval. Just don't give notice or accept the new position during the purchase. Period.
Don't switch banks or move around cash. While this won't kill a file (if the funds can be documented), you might want to kill me because the paper trail will be thorough. Most lenders will instruct the submission of recent bank statements of all of your accounts: savings, checking, money market, and other liquid assets. The lender looks for a consistent rise and fall of your money over the month, in order to avoid fraud. Even for innocent purposes, moving around cash or switching banks will be verified in your account history, and while that seems easy, sometimes it opens up examination of other items in your statements. Please avoid it!
If you are refinancing, make sure your floors have flooring and wires are within code, and your deck is not rotting off the side of the house to the point it is unsafe. Yes, really. While the appraiser is there to assess for value, blatant code violations will be noted in your appraisal, and re-inspection will be necessary and costly, typically $100-$150. Don't give the appraiser a reason to come back.Both Alimony and Child Support are debts deducted from income. Unfortunately, this is not a game of don't ask, don't tell. I think of these items as debts so when I ask for debts, just go ahead and mention all of them. By avoiding the mention of any debts, you are putting your earnest money at risk as well as everyone's time.If something big is coming down the pike, let me know. Getting a loan, strangely enough, is an art form. Sometimes things are more complicated and time consuming than originally thought. If your job is changing to part-time in a few months, you need to look at how you are going to qualify at that time. Please don't wait until we are in the middle of the transaction and no longer qualifying to make mention of these life changes.Have you filed your tax return? Yes, we will need an official extension with estimated taxes paid . Even if I don't request your tax return, the lender is going to the IRS to get a record of your filing. If it is not filed and not extended, we have a closing delay. Just know, the topic is not avoided even if the return is not in your loan file.
Read your tax return before you sign it. It is hard to believe that even accountants make errors, but they do! I should not be the first person to read your tax return and finding the error. It's a big deal because if you need that return to qualify and have to file a corrected return, we cannot proceed until the IRS records it, typically a minimum of three weeks.
Big Cash Deposits in the Bank can not be documented 90% of the time Do you have any large deposits (and by large, I mean over $1000) that might be easy to explain but hard to document? Let me know so we can tackle this issue early on. The underwriter will "take" that money out of your asset figures which could be disastrous for your loan.Send in your paperwork early. Sometimes things start moving really fast and the last item on your agenda is sending in the paperwork for your loan. If what you thought it said is not what it actually says, we could have a problem to solve. Getting information early on is the best way to prevent delays at the finishing line.Ok--this is not every crazy thing that happens in this business, but let's avoid pitfalls and keep your file on track.