Blog - Wendy M. Doerzbacher

Refinancing Your Mortgage? Know These Key Terms Before You Sign Your Paperwork

October 27, 2021 by Wendy Doerzbacher

Refinancing Your Mortgage? Know These Key Terms Before You Sign Your Paperwork When it comes to your mortgage, there are a lot of key terms that are important for every homebuyer to know, and this is no less true than when it comes to refinancing your most important investment. Instead of leaving what’s unknown up to chance, it’s important to be aware of exactly what you’re looking at so you can get the best mortgage product available. If you’re currently considering refinancing and don’t want to get snared by unknown terminology, here are some terms you’ll need to watch out for.

Cash-Out Refinance

This type of refinance is a transaction where the home’s mortgage amount is higher than the existing mortgage amount, and cash-out refers to the extraction of equity from the homeowner’s home. While this type of refinancing can be a means of tapping into extra cash to help you with monthly expenses, it also means that the cash you take out of your equity will be added to the balance you already owe on your home.

Rate-and-Term Refinance

This type of mortgage transaction involves the refinancing of an existing mortgage so that you can take advantage of a different interest rate. While this type of change will not alter the amount of your home loan, it will adjust the interest which means that your monthly payments may be lowered and your may have a shorter amortization period due to overall reduced costs. These types of loans can often come with lower interest rates than cash-out refinances.

Streamline Refinancing

This type of refinancing is offered by the Federal Housing Administration (FHA) and the Department of Veterans Affairs, and it is also offered by certain financial institutions. While this type of refinancing has its own set of stipulations, it is directed at those who want to take advantage of low interest rates or get out of an adjustable rate mortgage (ARM). While you may need to have a financial appraisal done in order to qualify for this option, it’s also possible that this will not be required to qualify.

There are a lot of key terms that go along with having a mortgage and refinancing it, but if you’re considering your options it’s very important to know what all of them mean so you can be sure you’re making the best decision. If you’re currently considering refinancing your home and need helpful advice, contact your trusted mortgage professional for more information.

When does an FHA Streamline Refinance Make Sense?

October 26, 2021 by Wendy Doerzbacher

When does an FHA Streamline Refinance Make Sense? The FHA streamline refinance is not right for everyone, but if rates significantly dropped or you can afford a fixed-rate loan and want out of an ARM, it can make sense. If you’ll stay in the home for the foreseeable future, you can either save money on interest or have a more predictable payment.

Before you jump on board, ask yourself:

Am I saving enough money to make the cost of refinancing worth it?
Would I feel more at ease with a fixed-rate loan versus an ARM?

When Doesn’t an FHA Streamline Refinance Make Sense?

Like we said, sometimes it doesn’t make sense to refinance.

First, make sure you can afford the closing costs. Unlike most other loan programs, you cannot roll your closing costs into the loan. Make sure you have the money to cover the closing costs plus the FHA upfront mortgage insurance fee equal to 1.75% of the loan amount. You may get a credit for some of the insurance you paid already.

Next, make sure the interest changes are enough to refinance. Just because you get a lower rate, doesn’t mean it automatically makes sense. Look at the big picture. Is the payment lower? Are the over loan costs lower? Look at the loan’s total cost over the entire term to decide.

Pros and Cons of the FHA Streamline Refinance

Pros:

Simple to qualify for and use
You may be eligible for an FHA MIP refund
No appraisal necessary
No credit check or income verification needed
A simple way to lower your payment or change your loan’s term

Cons:

You owe closing costs upfront
You’ll pay the upfront MIP again
You’ll start your loan term over again

FAQ – FHA Streamline Refinance

Do you have to pay closing costs on the FHA streamline refinance?

Yes, you always have to pay the closing costs upfront on the FHA streamline refinance. Some lenders may offer a no-closing cost loan, but the interest rate will be higher. This may negate the net tangible benefits of refinancing.

Do you need an appraisal for the FHA streamline refinance?

No, the FHA doesn’t require an FHA appraisal. This also means you don’t have to worry about making specific repairs to meet the FHA minimum property requirements.

Is there a minimum credit score required for the FHA streamline refinance?

The FHA doesn’t require lenders to pull credit for the FHA streamline refinance. If your lender pulls credit, they’ll typically require between a 580 – 640 to qualify, though.

Final Thoughts

If you have an FHA loan and know rates dropped lower than what you pay now, look into your options. You don’t have to use the same lender, so shop around and get at least 3 quotes.

Look at your options, comparing the rate, closing costs, and overall loan term. To qualify, you must have an on-time mortgage payment history plus prove you benefit from the refinance. It can be a great way to save money on your loan if you look for the best loan possible.

What’s Ahead For Mortgage Rates This Week – October 25, 2021

October 25, 2021 by Wendy Doerzbacher

What's Ahead For Mortgage Rates This Week - October 25, 2021 Last week’s economic reporting included the National Association of Home Builders’ Housing Market Index reports on building permits issued and housing starts, The National Association of Realtors® reported on sales of previously owned homes, and weekly readings on mortgage rates and jobless claims were also published.

NAHB: Builder Confidence Improves in September

The National Association of Home Builders reported an index reading of 80 for its September Housing Market Index. Analysts expected September’s index reading to match August’s reading of 76. Builders continued to face supply chain challenges and labor shortages amid growing concerns over rising home prices and affordability for would-be home buyers.

Component readings for the Housing Market Index also showed rising builder confidence. The index for current housing market conditions rose five points to an index reading of 87; builder confidence in housing market conditions over the next six months rose three points to 84. The gauge for buyer traffic in new single-family housing developments rose four points to an index reading of 65.

Robert Dietz, the chief economist for the NAHB, said “Policymakers must focus on fixing the broken supply chain. This will spur more construction and help ease upward pressure on home prices.”

Continuing supply chain problems caused some builders to limit building due to concerns over materials costs and availability. Shortages of small and medium homes would cause home prices to rise just as interest rates are expected to rise. These conditions add to concerns over affordability for first-time and modest-income home buyers.

NAHB HMI readings over 50 indicate that most builders surveyed have a positive outlook on housing market conditions.

September sales of previously-owned homes rose to 6.29 million homes sold on a seasonally-adjusted annual basis as compared to August’s reading of 5.88 million previously-owned homes sold and expectations of 6.10 million previously-owned homes sold. Increasing sales of pre-owned homes indicated that severe shortages of available homes during the pandemic were easing.

Mortgage Rates Rise, Jobless Claims Fall

Freddie Mac reported higher average mortgage rates last week as rates for a 30-year fixed-rate mortgage rose four basis points to 3.09 percent; rates for 15-year fixed-rate mortgages averaged three basis points higher at 2.33 percent. Rates for 5/1 adjustable rate mortgages fell one basis point to an average rate of 2.54 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

Initial jobless claims fell to 290,000 claims filed from the previous week’s reading of 296,000 first-time claims filed. Analysts expected 300,000 first-time claims to be filed. Fewer continuing jobless claims were filed last week; 2.48 million ongoing jobless claims were filed as compared to 2.60 million ongoing jobless claims filed in the previous week.

What’s Ahead

This week’s scheduled economic reporting includes readings from S&P Case-Shiller Home Price Indices, reports on sales of new and previously-owned homes, and the University of Michigan’s Consumer Sentiment Index. Weekly readings on mortgage rates and jobless claims will also be published.

Refinancing Your Mortgage? Know These Key Terms Before You Sign Your Paperwork

When does an FHA Streamline Refinance Make Sense?

What’s Ahead For Mortgage Rates This Week – October 25, 2021

Recent Articles

Our Location