1) Do I Have Enough Equity To Get A Mortgage?
To get a conventional loan, you will usually need to have at least 20 percent equity. This means that your house will have to be worth at least $250,000 to get a $200,000 loan. If you have less equity, you could end up having to pay for private mortgage insurance, which can easily add $100 or more to your monthly payment or we may have to divide the loan up into two portions to avoid the PMI. Several options exist.
2) How's My Credit?
Most lenders will look at your credit score as a part of determining whether or not to make you a loan. With conventional lenders, your rate will depend on your score and the higher it is, the lower your payment will be. Other lenders, like the FHA and VA programs have an all or nothing rule.
If you qualify, your rate won't be based on your credit, but if your score is too low, you won't be able to get any loan. Generally, 620 credit scores are the lowest that will qualify you for any loan. We will provide you with a free report and analysis if improvement is needed.
3) What Do I Want To Accomplish?
Mortgages typically offer a choice as to their term. While the 30-year loan is the most popular, shorter term mortgages save you money since you pay less interest over their lives. They also get you out of debt sooner, at least as regards your house.
The drawback is that they carry higher payments since you pay off more principal every month. This can make them less affordable for some borrowers. However in many cases people are able to reduce their loan term and keep their payment the same or only slightly increase it.
4) How's My Current Loan?
If you have an adjustable rate mortgage, you may want to switch to a fixed rate mortgage simply for the additional security it offers you. On the other hand, if you are planning to move relatively soon, your current mortgage could be a better deal whether it's fixed- or adjustable-rate.
When trying to decide what to do, compare the cost of refinancing with what it would cost you in additional interest to hold on to your existing loan. While the breakdown is different for every borrower, generally, you'll need to keep your current house and loan for anywhere from one to four years to break even on the costs of refinancing but it could be much less. I always compile a "break even analysis" for my clients free of charge to find out the feasibility.
Deciding what to do with your mortgage can be complicated. Working with a qualified and licensed Mortgage Banker that can consider every angle with you can help you to make a better decision. I would be happy to put my 13 years experience to work for you. Contact us today for a honest and free analysis of your loan.