March 11, 2020
The week ending March 6, 2020 saw a surge in refinance loan applications and many home loan blogs and market watch websites are talking about the current rush into refinancing as something not seen in roughly eleven years.
Low mortgage rates have dominated real estate headlines thanks to investor reactions to coronavirus news and many people are taking the time to look into refinancing their mortgages to save money over the long term.
What do you need to know about refinancing your home loan in an extremely volatile interest rate environment?
Are You Ready To Refinance?
If you have worked on your credit, know your FICO scores and what your lender may find in your credit report and you are willing to commit to the loan, it’s best to do so.
Some people take risks by holding off on the loan in hopes interest rates will fall, but in the current rate environment there is plenty of volatility and there is no way to accurately predict how long the current state of rock-bottom loan interest rates may last.
Some People Are Just Not Ready To Refinance
Mortgage loan rates are reported as being lower than ever right now. Not all people who wait won’t get a loan at the lowest possible rate. But if you have late or missed payments on your record in the last 12 months, or if you are still working on saving up for closing costs and other expenses, does hurrying help?
Applying before your credit is ready for the lender to review is not advisable. If you aren’t ready, applying anyway doesn’t get you closer to loan approval. It could even hurt your credit if the loan application is put in, the hard inquiry is run, and you get denied.
A “hard inquiry” on your credit report can lower your FICO score by a few points, not getting turned down for the loan. But for some borrowers losing those points can make a big difference.
If you need to wait to apply for a loan to get closer to being considered a good credit risk, applying with today’s low mortgage rates won’t do anything to get you closer to being viewed as that good risk.
Does being ready for your loan have more to do with budgets, savings, and being able to pay your closing costs upfront instead of financing them?
Keep in mind that not all closing costs can be rolled into the loan, but if this is your dilemma, talk to your lender about the overall cost of the refinance loan, and how much the loan will cost if you finance allowed closing costs instead.
Talk to a loan officer today about your existing loan, a refinance option that works for you, and the ability to get a mortgage rate lock commitment. Your lender–or another lender that you choose to refinance with–can help you learn what to do when you are ready to apply.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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