If you have a FHA or VA mortgage, you are eligible for a streamline refinance. A streamline refinance can be helpful if there is a sudden reduction in interest rates, because the borrower can quickly get approved without the typical underwriting process. There is no income documentation needed or asset guidelines. FHA insures the loan from the premise that if you have been making your payments at your current interest rate, then you certainly should be making them at a lower one.
What this means is that more than ever lenders have become cautious and are way more discerning towards their customers, to the point of restricting the choices available to applicants. The days of 95% mortgages are long gone, and mortgage lenders now request for more strict criteria when it comes to lend money.
They are several possibilities when it comes to remortgages, but one of the main questions you will have to face is the distinction between fixed rate and variable mortgages.
Bob takes a different approach and says, "FORGET THIS!!". He decides to do a short sale and sells his home to a new buyer with the help of a short sale broker for the market value of $200k. Bob moves his family into a rental home for 2 years at $1500/month and during that time re-establishes good credit lines. After two years, Bob decides to buy a home again and purchases in the same neighborhood he was before and even buys a slightly larger home. Let's say values have increased slightly over this 2 year period and Bob pays $230k for his new home. His mortgage payment is $1700. Fast forward 5 years (2years renting+5years in new home 7 years from start) and values have again went up to previous values and Bob's home is now worth 400k.
A third specialty mortgage product is the interest only mortgage. An interest only mortgage is typically the way to close on a property and pay the lowest monthly mortgage payment because you are only paying interest on the loan and not paying any of the principal down. Although this can dramatically lower the monthly payment, an IO product should be avoided in most scenarios.
Traditionally, an interest only product was for those that only planned to own the property for a very short amount of time (under 3 years). Most likely, the borrower was going to be rehabbing the home and/or moving out quickly. In this scenario, paying only interest cannot hurt the borrower that much.
Alan has been struggled with his high payment and eliminated all vacation, eating out, etc. Bob on the other hand has been going to the movies, taking vacations and not stressing too much about money because his mortgage is almost HALF of what it was.
In a depreciating market, this can be deadly since borrowers may find themselves owing more money than the house is worth. Borrowers should be careful about choosing an interest only mortgage and thoroughly discuss all options with a mortgage broker and a qualified financial advisor.
What this means is that more than ever lenders have become cautious and are way more discerning towards their customers, to the point of restricting the choices available to applicants. The days of 95% mortgages are long gone, and mortgage lenders now request for more strict criteria when it comes to lend money.
They are several possibilities when it comes to remortgages, but one of the main questions you will have to face is the distinction between fixed rate and variable mortgages.
Bob takes a different approach and says, "FORGET THIS!!". He decides to do a short sale and sells his home to a new buyer with the help of a short sale broker for the market value of $200k. Bob moves his family into a rental home for 2 years at $1500/month and during that time re-establishes good credit lines. After two years, Bob decides to buy a home again and purchases in the same neighborhood he was before and even buys a slightly larger home. Let's say values have increased slightly over this 2 year period and Bob pays $230k for his new home. His mortgage payment is $1700. Fast forward 5 years (2years renting+5years in new home 7 years from start) and values have again went up to previous values and Bob's home is now worth 400k.
A third specialty mortgage product is the interest only mortgage. An interest only mortgage is typically the way to close on a property and pay the lowest monthly mortgage payment because you are only paying interest on the loan and not paying any of the principal down. Although this can dramatically lower the monthly payment, an IO product should be avoided in most scenarios.
Traditionally, an interest only product was for those that only planned to own the property for a very short amount of time (under 3 years). Most likely, the borrower was going to be rehabbing the home and/or moving out quickly. In this scenario, paying only interest cannot hurt the borrower that much.
Alan has been struggled with his high payment and eliminated all vacation, eating out, etc. Bob on the other hand has been going to the movies, taking vacations and not stressing too much about money because his mortgage is almost HALF of what it was.
In a depreciating market, this can be deadly since borrowers may find themselves owing more money than the house is worth. Borrowers should be careful about choosing an interest only mortgage and thoroughly discuss all options with a mortgage broker and a qualified financial advisor.
About the Author:
Harris Smith offers advice on home equity line of credit and obtaining credit. Applying for Debt Consolidation can help.
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