BreakYourArm

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Refinance and Purchase Financing Available!


You will have access to many different Lenders with variety of loan programs for your individual loan need. You will also have a variety of loan programs from full documentation for Owner Occupied, 2nd home to Investment properties.Break Your Arm- Muscles

Deciding to refinance:

When you refinance your home, you seek to replace your current mortgage loan with a new loan that has more favorable loan terms. Usually, you refinance to pay off a higher-interest loan with a loan that has a lower interest rate. However, you may also decide to refinance to replace a fixed-rate mortgage loan with an adjustable-rate loan, or vice versa. After you refinance, the new lender holds a mortgage lien on your home.When you refinance, you can choose to borrow just enough to pay off the mortgage balance you owe. If you have enough home equity built up, you may also be able to borrow an additional amount in what is called a “cash-out” refinancing. You can use this extra amount to pay off other debts such as an auto loan or credit cards. You should evaluate a cash-out refinancing carefully.

If you’re thinking of refinancing your current loan balance, see:

Before you refinance just to cut your rate a half-percentage point or so, be sure to consider all the costs of refinancing, including:

  • Closing costs. Your closing costs include points. The IRS also calls these mortgage points, discount points or origination fees. Lenders that specialize in refinancing typically charge 1 or more points, with 1 point equal to 1% of the loan amount. Points are usually the largest closing cost. You should also expect to pay for other expenses directly related to processing and approving your application. These costs may include fees for a credit report, title search, title insurance, appraisal and recording a new mortgage lien.
  • Application costs. Some lenders may charge an application fee to refinance. Paying a loan application fee is something only the most desperate of loan applicants should face. If you have a good credit history, you should be able to avoid paying a loan application fee.
  • A loss of tax-deductible mortgage interest. When you refinance with a lower rate, you usually reduce the amount of mortgage interest you pay. As a result, you lose some future tax savings that you would otherwise have with a higher-rate loan.

 

When refinancing pays off:  If you decide to refinance, it helps to estimate the break-even point it takes for the refinancing decision to pay off. The break-even point is the number of months you need to live in your home after refinancing in order to recover the costs.For example, if you pay $2,000 in closing costs to refinance and you lower your monthly payments by $100, it would take 20 months to reach the break-even point if you were to calculate it on a straight-line basis ($2,000/$100).Say you bought your house five years ago. You borrowed $125,000 at a 10% fixed rate for 30 years. Your monthly payments for P+I are $1,097. You’re thinking of refinancing your loan balance of $120,718 at today’s lower rates. You want a 25-year loan, since you plan to be retired and living on less in 25 years.You can cut your monthly P+I payments to $1,013 if you can refinance at 9%. This is a monthly savings of $84 ($1,097-$1,013). If you face $2,000 in closing costs, you will break even if you live in your home an additional 24 months on a straight-line basis.In reality, a break-even analysis is more complicated. Nevertheless, a straight-line calculation gives you a reasonable estimate. One common rule of thumb is the 2-percent rule, which says that refinancing is a good deal if you can lower your mortgage interest rate by at least 2 percentage points. Other factors also ultimately affect your decision, such as how long you plan to continue living in the home. As mortgage rates go lower, this rule of thumb is less and less meaningful.For a more complete analysis, you have to consider any loss of tax savings, as well as whether you invest the money you save each month from lower payments.

 

There are the factors that will determine your ability to qualify for a mortgage:

(these are also referred to Layers of Risk in which no more than 2 are acdeptable)
1.  Credit – we will look at past credit history, debts, payment history, credit limits, etc.
*poor or shakey credit (below 620 credit is considered shakey)
2.  Reserves (savings, 401K, mutual fundsother liquid reserves)
*Unable to verify liquid assets
*unsufficient reserves
3. 
Payment Shock
     *dramatic payment increase with new mortgage or adjusting interest rate
4.  
Debt to income ratios
      *High Ratios (the difference between what is earned with income and the financial obligations you owe)
5. 
Property
      *Low appraisal value
*Appraisal under estimated value, stretched appraisal
*Appraisal is higher than the lender willing to risk
6.  LTV Ratio:  Loan to Value (new mortgage loan mortgage calculated against the value of the property)
*at 90% or higher
7.  Term
*the length of the loan (30, 20, 15 year term)

Contact me for a free no obligation pre-qualification application
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