Mortgages And Refinancing Your Home...
Everything You Need To Know

Mortgages and home refinancing can be complex, and may seem confusing. It is common to refinance your home, for any number of reasons. There are some things that you should know and be aware of before you consider refinancing your home or even looking at a first mortgage. There are many different types of mortgages, and the length you receive will vary depending upon your needs. Mortgages may run from five years to thirty years, which is one of the most comment mortgage lengths. Whether you are looking for a first time mortgage or you want to refinance your home, the process is almost identical.

The Loan Process

The loan application process is an important step to getting the financing you need, whether it is for a first mortgage or to refinance an existing mortgage. This application requires an enormous amount of paperwork. You must complete an application form, and details including your employer, the home desired, your personal information, and documentation to show your income and monthly expenses, and all of the debts you owe must be provided on this application to the mortgage company. Your credit record and credit score will be examined to determine whether you pay your obligations in a timely manner. It is imperative that you ensure your credit record is correct before you apply for a mortgage or refinance loan, because a low credit score or negative credit reports can cause your application to be rejected. You have a legal right to examine your credit report, and to dispute any incorrect facts contained in this file. There are three major credit reporting agencies in the US, and these are Transunion, Equifax, and Experian. Each agency may have a different credit report history and score, so make sure you know what all three reports include. The appraisal, down payment, inspection, and closing are all standard parts of the loan process as well.

The Importance Of A Down Payment

Unless you have an almost perfect credit score and history, getting a mortgage or refinancing loan with no down payment is not likely to happen, especially in the tough lending atmosphere right now. Usually a five to ten percent down payment is sufficient, unless your credit is in really bad shape and the score is very low. If this is the case, you may have to come up with a larger percentage of the loan as a down payment, such as twenty percent, to satisfy the bank. A higher down payment will give you smaller monthly payments and shorten the length of the mortgage loan, so it is advisable to put as much down as you possibly can. There are worksheets available to help you determine your monthly income and obligations, as well as to calculate what down payment you can make.

The Appraisal

What is an appraisal, and why is it so important for my mortgage loan? An appraisal is an independent third party report on the value and condition of the home that will be covered by the mortgage loan. This allows the bank to determine what the house is worth and if any repairs will be needed to allow the home to be safely lived in. The appraisal is done by looking at your home inside and out, and determining the value of similar homes in the neighborhood as well. This will allow the appraiser to set a dollar value for your home, which may be less or more than the seller is asking. Sometimes the appraisal value is less than the asking price, and when this happens the bank will not give the full asking amount for the home. You can solve this by adding an amount that is equal to the excess of the loan value, to make up the difference. The cost of the appraisal may be covered by the bank, the seller, or the buyer, so make sure you know who is responsible for these costs before you sign any agreements.

The Closing Process

The closing process is an important step in any mortgage or refinance loan. This process finalizes the sale and the loan for the home. Once your application for a loan has been approved the lender will send you a letter committing to this fact. As soon as this letter is received you can set up a closing date. During this meeting the final documents are executed and specific fees and costs must be paid. A personal check is not considered acceptable when it comes to paying these fees, and instead a certified cashiers check or escrow account is needed. This is because the law states only good funds can be used to prevent loan fraud, so the funds must be verified as good. You will receive a list of the total closing costs before the closing appointment, and normally the lender is required to give you this list within a specific number of days, and this should outline the exact cost for each component. Some items that may be included in closing costs are any down payment amounts, any escrow amounts needed to satisfy the property tax and home insurance needs for a specific length of time, title insurance costs, transaction taxes, settlement services, recording fees, and any other fees required by the lender. Some of these costs may be included in the loan amount and may not need to be paid at the closing, depending upon your loan and lender. After the closing occurs, the loan and home are yours, and you can take possession according to your purchase contract.

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