Home Loan Refinance Frequently Asked Questions {FAQ's}:
Q. Should I refinance?
A. Sometimes it makes sense to
refinance. Sometimes it doesn't. The decision to refinance
is rarely based solely on interest rates. For instance,
you have to take into consideration things like how long
you expect to be in the home; how much equity you have in
the home; what your closing costs will be; would
refinancing include the paying of points?; will your lower
payments more than make up for the closing costs, fees and
points if any. Virginia Mortgage Bankers, LLC can help you
decide if refinancing makes sense for your situation and
to choose the best program for you. In the meantime, our
Refinance Calculator can give you an idea if refinancing
might be for you. Our interest
rates can change many times a day. Please call
804-282-8808 for our most current refinance rates
Q. Rates Are Low. Is Now A Good
Time To Refinance?
A. When interest rates fall, a
homeowner should definitely call a lender about
refinancing, but he or she should discuss their entire
financial situation and goals before making any final
decision. Is your goal to lower your monthly payment? Debt Consolidation? Use our debt
consolidation calculator and see if it makes sense. Get cash out for home
improvements? Buy that second home? Ask
your us to provide a couple of refinancing scenarios
for you, showing how your loan term length, monthly
payment and your total interest expense on the loan will
change. After looking at these scenarios, it will be clear
whether or not you should spend the money to refinance.
Q. When should I refinance my current mortgage loan?
A. It is often said that you should refinance when
mortgage rates are 2% lower than the rate you currently
have on your loan. Refinancing may be a viable option even
if the interest rate difference is less than 2%. A modest
reduction in the loan rate can still trim your monthly
payment. For example, the monthly payment (excluding taxes
& insurance) would be about $770 on a $100,000 loan at
8.5%. If the rate were lowered to 7.5%, the monthly
payment would be about $700, a savings of $70. The
significance of such savings in any scenario will depend
on your income, budget, loan amount and the change in
interest rate. Your trusted lender can help calculate the
different scenarios.
Q. Should I refinance if I plan on moving soon?
A. Most lenders will charge fees to refinance a loan.
If you plan to stay in the property for less than a couple
of years, your monthly savings may not get a chance to
accumulate and recoup these costs. Let's say a lender
charged $1,000 to refinance your loan, but it resulted in
a monthly savings of $50. It would take 20 months (1,000
divided 50) to recoup the initial costs before you start
to realize some savings. Some lenders will charge a
slightly higher than average interest rate on refinance
loans, but waive all costs associated with the loan. The
attractiveness of these loans will depend on the interest
rate you are being charged on your current loan.
Q. What fees do I need to pay?
A. In addition to an application fee ($250-350) you
will likely have to pay an origination fee (typically 1%
of the loan amount). In many cases you will have to pay
much of the same costs that you had to pay with your
current home loan (title search, title insurance, misc.
lender fees, etc.). The sum of these fees could cost you
up to 2-3% of the loan amount. If you don't have the money
to pay for associated loan costs, look for lenders that
offer 'no-cost' loans. These loans will charge a slightly
higher interest rate, so ask the lender if it would still
make sense to refinance using this type of program.
Q. What are points?
A. Points are costs that need to be paid to a lender
in order to receive mortgage financing under specified
terms. A point is a percentage of the loan amount (one
point = one percent of the loan). One point on a $100,000
loan would be $1,000. Discount points are fees that are
used to lower the interest rate on a mortgage loan (you
are discounting the interest rate by paying some of this
interest up-front). Lenders may express other loan-related
fees in terms of points. Some lenders may express their
costs in terms of basis points (hundredths of a percent).
100 basis points = 1 point (or 1 percent of the loan
amount).
Q. Should I try to pay as many discount points as
possible to lower my loan's interest rate?
A. If you plan on staying in the property for at least
a few years, paying discount points to lower the loan's
interest rate can be a good way to lower your required
monthly loan payment (and possibly increase the loan
amount that you can afford to borrow). If you only plan to
stay in the property for a year or two, your monthly
savings may not be enough to recoup the cost of the
discount points that you paid up-front. Ask your lender
how long it would take for your monthly savings to recoup
the costs of the discount points.
Q. What does it mean to lock the interest rate on a
mortgage loan?
A. Due to the nature of interest rate
movements,
mortgage rates can change dramatically from the day you
apply for a mortgage loan to the day you close the
transaction. If interest rates rise sharply during the
application process, it could make a borrower's mortgage
payment larger than he/she previously thought. To protect
against this uncertainty, a lender can allow the borrower
to 'lock-in' the loan's interest rate, guaranteeing the
borrower the prevailing loan rate for a specified period
of time (often 30-60 days).
Q. Should I lock-in my loan rate when I apply for a
mortgage loan?
A. No one knows for sure how interest rates will move
at any given time, but your lender may be able to give you
an estimate of where it thinks mortgage rates are headed.
If interest rates are expected to be volatile in the near
future, you may want to consider locking your interest
rate if rising rates will no longer allow you to qualify
for the loan. If your budget can handle a higher loan
payment or if the lenders lock fee seems excessive for
your means, you might want to consider allowing the
interest rate to 'float' until the loan closing.
Q. I've had credit problems in the past. How does this
impact my chances of getting a home loan?
A. Obtaining a home loan is possible even with
extremely poor credit. If you have had credit problems in
the past, a lender will consider you to be a risky
borrower to lend to. To compensate for this added risk,
the lender will charge you a higher interest rate and
usually expect you to pay a higher down payment on your
home purchase (typically 20-50% down). The worse your
credit is, the more you can expect to pay for an interest
rate and a down payment.
Q. I've only been late a couple of times on my credit
card bills. Does this mean I will have to pay an extremely
high interest rate?
A. Not necessarily. If you have been late less than
three times in the past year, and the payments were no
more than 30 days late, you probably have a pretty good
chance at getting a home loan at a competitive interest
rate. Lender guidelines will vary, but most lenders will
excuse a couple of minor 'late-pays' as long as the
borrower can provide a reasonable excuse explaining them
(i.e. job transition, illness). If the late-pays were 60+
days late and cannot be explained, you may have to settle
for a higher interest rate.
Q. How can I tell who has the best deal on financing?
A. When comparison shopping among lenders, remember
that a lender can structure financing for a borrower
several different ways. A lender can charge higher fees
and offer a low interest rate while another may charge a
slightly higher interest rate with lower fees. In order to
make an 'apples to apples' comparison between lenders, ask
each lender what their interest rate is for a zero
discount point loan (based on a 30 or 60 day lock period).
Q. Are there really loans with
"No Closing Costs"?
A. There are few loans that truly have no closing
costs. Sometimes lenders will not charge application fees
and agree to pay the appraisal and title fees, but they
may increase the rate. Lenders can also roll the costs
into the amount of your loan. So, because you're not
paying costs up front, it's called "no closing
cost" loans. While slightly increasing your mortgage
might be acceptable to you, keep in mind that it's not
really a cost-free loan.
Q. Should I choose the lender
with the lowest interest rate and costs?
A. There are primarily two
things to consider when choosing one lender over another:
the quality of service being provided and the cost of
services provided. Quality of service is especially
important to those who have never purchased a home.
First time homebuyers will likely have many questions
regarding the financing process and available loan
options. A good
lender should be able to get you through the financing
process leaving you confident that you made a sound
financial decision.
Q. How long does it take
to refinance?
A. Refinancing normally takes between two and four weeks, depending on a
few things. Do you have a recent appraisal?
Are you in an area that appraisers can get to easily? Are
there plenty of comparables in your neighborhood? Often
times, the appraisal is what takes the longest to obtain.
And during refinancing booms, appraisers can be difficult
to schedule.
Contact us at Virginia Mortgage Bankers, LLC today so we may help or look here for more
answers to your questions on refinancing your Virginia home loans!
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