Gina Farrell

Indepenent Funding Group

Refinancing A Mortgage: Is It Too Soon?

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Refinancing A Mortgage: Is It Too Soon?Due to the fact that mortgage rates are still hovering near record lows, many homeowners are considering refinancing to a lower interest rate. This is a great way for homeowners to shorten the term of the loan, reduce the size of their monthly payments, and access cash for a home improvement project. On the other hand, there are some situations where it might be too soon to refinance an existing mortgage. What are a few factors to consider?

Conventional Home Loans Might Require A Certain Amount Of Equity

Homeowners with a conventional loan should reach out to their lender to see what the requirements are on the home loan before refinancing. Some lenders require homeowners to have a certain amount of equity built up in the home before they allow lenders to refinance, particularly for a cash-out refinance (when homeowners refinance and tap into home equity as a source of cash). Other lenders might simply require homeowners to wait six months after taking out the initial home loan before going through the refinance process. This all depends on the type of home loan.

FHA Loans Have Several Refinancing Options

An FHA loan is a loan backed by the government. There are several refinancing options available. First, homeowners seeking a cash-out refinance must have lived in the home as the main residence for 12 months and must have had a mortgage for six months. A simple rate adjustment refinance requires seven months of waiting after taking out the initial loan. Finally, anyone going through the FHA streamline process must have made six months payments in order to go through this process.

VA Loans Have A Simple Waiting Period

Anyone with a VA loan must wait 210 days or make six mortgage payments before they are allowed to refinance. Homeowners with questions should reach out to the lender to learn more.

It Might Be Time To Refinance

Because interest rates are still low, this could be a great time for homeowners to refinance their current home loans; however, it might be too soon for some homeowners. Keep in mind that there will also be closing costs associated with refinancing a home loan. Homeowners should work with a professional to see if refinancing is worth it for them.

What Are The Most Common Mistakes Homeowners Make When Refinancing?

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What Are The Most Common Mistakes Homeowners Make When Refinancing?There are lots of people who are looking to take advantage of low interest rates to refinance their homes. This provides homeowners with an opportunity to save tens of thousands of dollars over the life of the loan. It could also allow homeowners to access equity to finance a home renovation or shave years off their mortgage. On the other hand, there are also a lot of people who make mistakes during the refinancing process. What are some of the mistakes that everyone should make sure they avoid?

Avoid Saying Yes To Loan Forbearance On A Mortgage

First, try to avoid mortgage forbearance if you can. If homeowners decide to pursue mortgage forbearance, they might have a bit of extra cash on hand because they will be able to skip a few payments. On the other hand, this could signal that the homeowner has issues related to his or her cash flow. As a result, homeowners might not get the best offer possible when they apply to refinance their mortgage down the road.

Always Check The Credit Score Before Applying

Next, homeowners should always check their credit scores before they decide to apply for a refinancing opportunity. It is not unusual for people to have mistakes in their credit scores. Nobody should have to pay for someone else’s financial mistakes. Homeowners have to remove these inaccuracies from the credit report before they apply for a refinancing opportunity. That way, homeowners have access to the best terms possible.

Check The Estimate Before Agreeing To A Refinance

Finally, homeowners also have to check the estimate before they agree to a refinance. Even though there are opportunities to save a lot of money, there are other fees involved. These could include points, origination fees, and other fees that could be included in closing costs. Homeowners have to be ready to pay these costs if they are going to refinance their loans.

Avoid These Mistakes When Refinancing

These are a few of the most common mistakes people make when they go through the refinancing process. By avoiding these mistakes, homeowners can place themselves in the best position possible to save money by refinancing their loan to more favorable terms.

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