August 20th, 2009 | by |
The economic downturn has caused some changes in the mortgage refinancing industry. Namely, it has to do with expenses that the borrower has to pay. In days gone by, you might’ve been able to refinance without paying any points and fees, but today that’s all changed. The vast majority of conforming loans are sold to government-sponsored organizations like Fannie Mae and Freddie Mac. Some time ago they started charging borrowers additional fees. The first one you run into is called adverse market delivery charge and could add as much as a quarter of a percentage point. So keep that in mind when shopping for the best refinance mortgage rates.
Also in the past, interest rates used to be very similar from one lender to another, but now they can vary as much as a percentage point or more. Some of the most competitive rates are found at smaller banks and credit unions. Some of the larger lenders no longer allow brokers to sell their products. So if you want to see all the rates in your area you’ll have to get on the Internet, get on the phone, and do some shopping yourself.
It is amazing how many people cannot decide whether they should refinance or not. To be fair, the criteria seem to change from month to month and year to year. The fact is lenders have become stricter, and their lending practices have changed. You can expect to have to provide more explicit documentation for your income, for your debt, and your ability to repay the loan. While credit scores may have not mattered in the past, they matter now. If you want the lowest mortgage rates available, you need to have a credit score of 720 or higher. In the past equity did not matter. Now you can expect to have to have a 10% equity stake in your property to refinance.
If you have recently become unemployed and need to refinance your home loan you will have a hard time finding a lender to oblige you. Banks won’t make new laws to such people until they can show pay stubs from a new job for at least 30 days. He unemployed homeowner has an option of using a new government program for distressed people, but they’re usually available only to those who at least 90 days delinquent on their payments.
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