If there’s ever been a time to refinance your home via a Florida home loan, now’s the time. In a lending environment where 30-year interest rates are still below 5 percent and 15-year interest rates are resting between 4 percent and 4.5 percent, now is definitely the time to begin thinking seriously about refinancing your Florida home loan.
However, before you rush off to complete your Florida home loan application, there are 8 things you need to consider:
1. Know Your Current Mortgage Interest Rate
The natural reaction when we see interest rates dive down to near record lows is to rush out and begin filling out home loan applications. However, in too many cases, Florida homeowners pay attention to only the new home loan interest rate rather than taking into consideration exactly how much they’ll save through by refinancing. Sure, it’s great to tout a low interest rate you just got on your refinance, but only if it actually saves you money over the long haul.
2. Be Sure You Know Exactly What Your Home is Worth
Folks – there’s no way to say this without being blunt: Home values in today’s Florida real estate market have just plain tanked. Many people have seen their actual home values recede by as 30 to 50 percent in the past year. For this reason, it’s very, very important for you to know whether your home still has the equity required for your refinance (defined as the balance of what your home is worth versus what you owe) or if you are “upside down” with your home loan (defined as owing more on your home loan than your home is presently worth). No equity, or not enough equity and your Florida mortgage refinance is not going to happen.
3. Know Whether You’re Upside Down on Your Florida Mortgage
There have been some Federal guideline changes that allow for refinancing up to 105 percent of your home’s value, but you may not be able to refinance without bringing cash to the table. (However, there is still a chance you may be eligible for a loan modification.)
4. Know Your Current Credit (FICO) Score
The days of getting financed or refinanced with a 580 credit score are over. The credit crisis we’re in right now has lenders tightening credit requirements more than ever. A good place to go for a copy of your credit report is MyFico.com, where you can purchase your credit history and FICO score for $15.95. They also have a useful online community where you can gain some valuable insight into how to raise and maintain your credit score. You never know what your credit score is until you check. Knowing your credit score can help you make the call as to whether or not you’ll have to make use of a bad credit loan or go with a conventional option.
5. Take Time to Evaluate Different Florida Mortgage Brokers
With so much information on home loans and mortgage available now on the Internet, looking for the best possible mortgage deal takes a little more time and effort than it used to. Many mortgage brokers push the absolute limits on what they’re allowed to charge borrowers in fees, so you need to do your homework to find one that will treat you fairly.
Your best bet is to talk to a mortgage broker who is familiar with lending in the areas you wish to buy. Do your homework, ask questions, and choose the mortgage broker who provides you with answers you feel most comfortable with.
6. Find out Whether Your Second Mortgage Lender Will Subordinate to Your New First
One of the most common forms of a 2nd mortgage is a home equity loan. Contact the lender for your home equity loan and ask whether they will agree to function as the 2nd lender to your new “first” lender. It sounds confusing, but it will make things easier for you – as you will be able to refinance your first mortgage, while leaving your second loan in place. There is the chance that your 2nd lender won’t agree. In this case, you may have to seek a refinance that can pay off your 2nd mortgage as well.
7. Take a Look at the Big Picture, Not Just Your New Interest Rate
Yes, it’s great to score a new low interest rate. However, it’s also important to determine how much you’re going to pay in fees and closing costs for your new mortgage. Also, you will want to consider the time it will take to pay yourself back the cost of the refinance with your monthly savings. For example, if your new home loan payment will save you $50 per month, and you sustained a cost of $5,000 to refinance, you’re looking at 100 months — that’s over eight years — to pay back the cost of doing the loan. This means that you won’t begin to realize true savings until you are fully into the eighth year of paying down the mortgage.
So, unless you’re reducing the length (term) of your home loan significantly (going from a 30-year to a 15-year), or you anticipate being in a situation where you can pay off the costs in a relatively short period of time (say, less than a year or 18 months), refinancing may not be right for you.
8. Get Your Mortgage Refinance Paperwork Together
The days of No-Doc loans or loans requiring minimal paperwork are long past. In today’s lending environment, mortgage lenders are going to want to know for sure that you can bear the brunt of your new loan. It is absolutely imperative that you have your paperwork in order before you begin the refinance dance.
Collect your past 2 years W-2 statements, your 2 most recent pay stubs, copies of your last two federal and state tax returns, copies of your last 2 months of bank statements (all pages – even if the last ones are blank), retirement account paperwork, and other information related to accounts you plan to use to support your ability to repay your mortgage. When you have all of this pulled together, that’s when you call your Florida mortgage broker.
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida Home Loans Specialist, I’m your guy. Call me at 863-604-3019 or apply online for your Florida home loan. I’ll keep you posted and let you know when it’s time to pull the trigger!
