When Is It Worth Paying More on Your Mortgage?

Original article found on MoneyTips.com here:

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Some homebuyers pay more on their mortgage in order to pay the mortgage down more quickly, or pay points upfront to lower their interest rate and their monthly payments – but are there reasons why you would ever want to pay more on your mortgage based on service from the lender? Here are a few questions that, if answered correctly, may make you decide the extra money is worth the lender service element.

Can You Explain These Documents In Terms I Can Understand? – To some first-time buyers, the documentation can be overwhelming. After days of trying to grasp all the terms and industry jargon, the forms may as well have been printed in Mandarin Chinese.

A detailed explanation of the Truth-In Lending Form, the Good Faith Estimate, the HUD-1 form and all the associated terms, and a full explanation of the APR (including what fees are included and which are not) in simple terms can go a long way to establishing trust with a lender. A detailed explanation of the myriad closing costs in layman’s terms can seal the deal.

What Are My Options For Avoiding PMI? – Private Mortgage Insurance (PMI) is generally required on any loan that contains less than a 20% down payment to insure the lender against default. While the easiest way to avoid PMI is to pay 20% down, some lenders offer creative options, including self-insuring through offering a higher interest rate. This may appeal to you if you do not have sufficient down money.

Are Your Timelines Accommodating? – You may need flexibility in your timeline to either accelerate or decelerate the process – for example, if you are you trying to sell one house and buy another simultaneously, the closing on your new house may be contingent on the sale of the old one. A lender that can accommodate the twists and turns of this process may be worth the extra fees or higher interest rate you may incur for the privilege.

Do You Offer a Float-Down Option? – At some point, you will want to lock the rate on your loan, to guarantee the rate does not rise between approval and closing. Of course, the rate could also fall, saving you money. Some lenders offer a float-down option, accommodating a lowering of the interest rate. Usually there is a fee involved for this privilege, but in higher-interest rate times, this may appeal to you.

How Long Do You Expect to Hold the Loan? – The majority of lenders do not hold onto the loan, but instead quickly sell it into the secondary mortgage market in order to free up more capital to make new loans. However, there are some lenders (generally known as portfolio mortgage lenders) that originate and hold onto some of their loans as part of an overall package service that they provide to their customers, such as deposit accounts. Their mortgage rates may be correspondingly higher to account for their lost opportunity costs.

If dealing with the original lender for any downstream problems appeals to you, or you can take advantage of other package deals, this approach may be for you.
There are indeed times where you may want to pay more for a mortgage for the privilege of extra service. However, most of these situations can be overcome with better education. Research the mortgage process as much as possible, and you are less likely to need to pay for extended service – although you may still choose to out of convenience.

Wells Fargo Denied Your FHA Streamline Refinance: Now What?

When rates are low, many people who have FHA loans are searching for the best program to use to refinance and save some money on their monthly mortgage. One of the most common refinance programs for people who currently have an FHA loan is the FHA streamline refinance. The FHA streamline allows you to refinance your current FHA loan into another FHA loan with minimal paperwork.

FHA Streamline Refinance Guidelines: What You Want To Know

The FHA streamline has published guidelines by HUD – but that doesn’t mean that each lender has those guidelines and only those guidelines. It is very common for each lender to develop some of their own “overlays” to the HUD guidelines – so they are using HUDs official guidelines for the program and then also using their own.

So if Wells Fargo denied your FHA streamline loan, what you will want to do is find out if it was because of a Wells Fargo overlay or if it was because you don’t meet the official HUD guidelines.

If you find that you are in this situation, there are two simple things you can do. 1. Ask Wells Fargo if you don’t meet the criteria due to the official HUD guidelines or one of their overlays or 2. Just shop for another lender and see what they say.

Shopping Multiple Lenders: Get The Best Deal

If Wells Fargo denied your FHA streamline and you didn’t shop multiple lenders – the easies thing to do is probably to just shop multiple lenders and see what the other lenders say. You may be surprised to learn that each lender works slightly differently and in the event that you have been denied by one, it doesn’t necessarily mean that you will be denied by all of them.

Shopping multiple lenders is easy – you can start right here with some local lenders who update their most current mortgage rates available and take the first step to getting qualified today.

Refinancing is Popular When Rates are Low

With home loan and lending rates at historic lows, now is the best time to borrow money to make investments that you have always wanted to make but have been waiting for the right time.

Lending rates are at their lowest since 1961, and aren’t likely to be this low ever again.

Although irresponsible lending and borrowing was one of the causes of the economic breakdown in 2008, borrowing is now one of the best options for those who are looking to make investments that will pay off in the future. The Federal Reserve has announced that they plan to keep interest rates as low as possible through the year 2014, but this does not mean that they will stay down as far as they are now. Rates are almost certain to go up over the next few years, making now the best time to borrow money if you are considering it. Here are three great ways to take advantage of low rates. 

  1. Buy a home, rental property, or second home. With home loan rates as low as they have been in history, there has never been a better time to buy than right now. Loan rates have been cut almost in half since the economic crash, and lenders are pulling out all the stops to make it as easy as possible for buyers to get into the home of their dreams. Little or no money down up front, low interest rates, and low or no closing fees once everything has been said and done are just a few of the ways that lenders are trying to get people to buy in this down economy. If you have the extra income, now is the best time to buy additional properties and use them as rentals or vacation homes. Prices are starting to rise back up, and home values are only going to increase as the housing market is on the mend. If you want to buy, do it now.
  2. Refinancing your home is another great option to help you take advantage of low rates. If you bought a home before 2008, you are likely paying an interest rate that is much higher than what is being offered to home buyers now. If you have a rate that is about 4%, you can contact your lender and ask about their various refinancing programs. For example the HARP refinance program is popular as well as . Look for streamline refinance options, as these are very cheap and quick and will help you start saving hundreds of dollars right away.
  3. Improving your home is one of the other ways that you can take advantage of low rates and still make a profit on your investment. Borrowing money on a home improvement loan is a great way to get a low rate and add value to your home. Consider remodeling the kitchen, adding another bedroom or bathroom, or finishing the basement and adding hardwood floors. All of these improvements can be funded with a home improvement loan and will add significant value to your home if you ever want to sell.

With the low rates that are available now, there has never been a better time to borrow and make your financial dreams a reality. Be sure to shop around with different lenders (and make sure they are FHA and HUD approved because that is a popular loan option) to make sure you are getting the best rates. Start looking for the best rate in your area today with one of our loan officers who is waiting to help you.

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.