Odds are, your mortgage is the highest bill you pay every month. Unfortunately, that also means that in the event of a financial calamity your mortgage, and your home, can be at risk. Whether you’re looking for a way to help yourself and your family now, or if you’re looking for a way to protect your greatest asset in the future, there are several programs that can help with refinancing mortgage loans. Home refinance programs are used by thousands of people to lower payments, reduce their interest rate, and protect the investments that so many Americans have made in their property.
HARP: Home Affordable Refinance Program
Sometimes referred to as an Obama-refi, this program was developed by the Federal Housing Finance Agency to help homeowners who are able to keep up with their payments but have virtually no equity in their home. The program is designed to help consumers get the best deal possible on a home loan by refinancing the loan they already have. In order to qualify, homeowners have to have had on-time payments for the past six months (no payments later than 30 days). The home being refinanced must also be a primary residence; this is not a good option for anyone looking to refinance an investment property. Finally, the loan has to have been written prior to May of 2009 and you must have a loan to value ratio of at least 80%.
While this program has helped thousands of homeowners qualify to refinance a home mortgage with lower interest rates and/or get out of adjustable-rate mortgages, today it is becoming harder to qualify due to the fact that a mortgage has to be at least nine years old. Without a significant drop in the value of a property, it’s rare to have so little equity in a property that has an owner that has been making loan payments for nine years. If you don’t qualify for this program, though, don’t worry. There are several other options.
The Federal Housing Administration has several home refinance programs that can allow homeowners of primary residences to take some of the equity out of their homes. In order to qualify, borrowers must have a credit score of at least 580, a good payment history going back at least 12 months, and meet FHA requirements for the debt-to-income ratio. If these conditions are met, a homeowner can withdraw up to 85% of his or her home’s total value as cash with a refinance home loan.
Participating in the FHA cash-out refinancing mortgage loan program does require borrowers to meet certain conditions, but rates are often slightly lower than loans on the private market. However, if you cannot meet these conditions, it may be time to look at refinancing your loan on the private market.
VA Refi Loans
For former and active duty service members who qualify, a VA refinancing can be a good way to pull nearly all of the equity out of a property. Because VA loans require no down payment, borrowers can use this type of refinancing to get a lot more money out of a property than they would otherwise qualify for with other refinancing programs.
Borrowers who are looking at VA programs need to pay close attention to the funding fee, however. This fee can add several thousand dollars to the total amount being financed.
Private Market Lending
Thousands of banks are willing to write a new mortgage on a property that already has a loan attached to it. Of course, each lender will have its own set of standards that a borrower has to meet, making it difficult to shop for a new loan. Fortunately, websites such as this one can allow you to compare multiple loans at the same time.
Applying for a cash-out refinancing program on the private market is a very similar process to getting a loan for a new property. Borrowers should strive to have a good credit score and leaving some equity in a property will tend to make lenders look more favorably upon a borrower. Typically, banks look to keep at least 80% of the equity in a property, but there are multiple lenders that are willing to forgo this rule for the right borrower.
Private market lending is usually the only option for people looking to refinance a rental or investment property. Fortunately, there are many more banks today who are willing to consider these types of loans, and several who are willing to write jumbo loans on an entire real estate portfolio rather than separate loans for each property.
Be sure to carefully consider your options before deciding on a home loan refinance. Take the time to look at multiple programs and lenders.