Month: February 2020

Closing costs are those costs associated with the purchase of a home that go beyond what you are providing as a down payment.

Refinancing your mortgage can be a great way to lower either your interest rate or payment or to use the equity in your home to fund other things, such as home projects or education. (Equity is the difference between what your home is worth and what you currently owe on it.)

If you’re interested in refinancing, there are two types of refinancing options available to you. The first is called a rate-and-term refinance. This is where you take no cash out of the transaction. The other type is called a cash-out refinance, and it allows you to take money out.

On the pro side, mortgage interest rates are still at relatively historic lows. With home prices increasing in many parts of the country, this means equity has grown over the last few years for many homeowners, making it easier for them to refinance their homes than it has been for some time.

On the con side, there are things you need to think through before you start the process of refinancing your home. The first is whether it’s the best option you have available at this time.

For example, if it costs you $1,500 to refinance your mortgage and lower your payment by just $40 per month, consider your payback period (how long you’ll be enjoying the payback of this lower payment). If you are planning to move in a few short years, you may want to consider other options.

Also, with increased equity in your home, you’ll have access to more funds than you might have otherwise. Tapping into this money could mean a higher mortgage payment (sometimes significantly higher than what you have now), and it will be higher for as long as you have this mortgage.

Lastly, cash-out refinances carry a higher interest rate than rate-and-term refinances.

If you have any questions about how this process works, I’d love to answer them. Just give me a call.

Lenders typically ask that you are well into the approval process and likely to be approved before they are ready to lock an interest rate for you.

This means they have run your credit information and seen income and asset documentation that gives them the confidence to spend more time and resources on you. Some may require full approval before they are willing to lock your rate.

Another thing they will ask for is a signed real estate contract. People could spend months looking for and finding a home and even more time after that getting to the closing table.

Rate locks are time-sensitive and cost lenders money to put into place, so lenders want to be sure you have both enough interest in a property to sign a contract on it and enough interest in the lender to commit to following the loan to completion.

So, when is the right time to lock your interest rate? The answer is when you are eligible and have a rate that you are comfortable locking in.

After you lock your rate, you are protected from rate increases, but you may be unable to relock should the rates go down. Of course, everybody wants the very best rate, but nobody, including lenders, can predict what rates will do.

It’s best to remain in close communication with your loan officer and real estate agent to determine the best time to lock your rate during your home purchase.

If you have additional questions about rate locks, please give me a call. I’m happy to help.