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Mortgage Refinance Virginia — When Is It Worth It To Refinance?

Sunday, August 16th, 2009

When considering mortgage refinance in Virginia, you need to be sure that the new interest rate will be low enough (the interest rate difference between the new refinance mortgage and your existing mortgage will be great enough) to pay for the cost of refinancing.

When interest rates were two points below your current mortgage rate, it was considered a good rule of thumb to refinance. But with today’s low closing costs, even a difference of one percent can save you money on your interest costs. Even with low fees, it only worth it to refinance when you can be sure you can recoup the mortgage costs.

Figuring Up Costs

Refinancing is simply paying off one loan and taking a new one. The same fees that you paid with the first mortgage, you will probably have to pay for the refinance mortgage . Usually, loan costs range between $2000 and $6000 for a $200,000 loan. You will also have to add in points for lower interest rates (i.e., buying down the interest rate, adding additional thousands of dollars in costs. The only way to recoup these costs is to keep your mortgage for several years.

Interest Rates

To make refinancing worth it financially, you need to be sure that interest rates are low enough to pay for the cost of refinancing. One simple way to figure this out is to use a mortgage interest calculator from one of the lending sites. These calculators will give you an estimated monthly payment and the total cost of the interest. By punching in different interest rates, you can see your potential savings.

Mortgage Term

Besides interest rates, you also need to compare terms (i.e., the length of the mortgage). The shorter the loan the less you will pay in interest. Ideally when you refinance, you should choose a loan with a shorter term. You can also choose a biweekly mortgage, where you pay half a mortgage payment every other week, which can reduce your loan by years.

Finding Low Cost Lenders

Not all lenders charge the same fees or interest rates, so you can save thousands by searching for lenders. You can easily go to the big name mortgage lenders and request quotes, but some smaller financing companies offer better deals. The easiest way to find them is to look online for a local mortgage broker site. Essentially, you enter some basic information about yourself and income, and then you receive several different quotes. From this list of offers, you can decide who is offering the best mortgage refinance Virginia package.

Mortgage refinance Virginia

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Mortgage Refinance Virginia: Tips — Debt to Income Ratios

Thursday, August 13th, 2009

Mortgage Refinance Virginia

Tips — Debt to Income Ratios

Your mortgage refinance Virginia success is enhanced by your understanding of how lenders use debt-to-income ratios in processing your mortgaStop Foreclosurege refinance application in Virginia.

A thorough knowledge of debt-to-income ratios can help you get the most value from your mortgage refinance, debt consolidation or purchase mortgage transaction in Virginia.

How Computed

Debt-to-Income Ratios, often referred to as “DTIs,” are a key calculation used in the mortgage refinance, debt consolidation, and purchase mortgage application process. A debt-to-income ratio is arrived at by dividing your monthly debt payments by your pre-tax income. Debt-to-income ratios are used to determine how much money you can borrow.

There are two different types of debt-to-income ratios which are used in mortgage refinance, debt consolidation or purchase mortgage underwriting in Virginia — a Front-End Ratio (or “Front Ratio”) and a Back-End Ratio (or “Back Ratio”).

Front Ratio

The Front Ratio is calculated by dividing your income into the sum of your total monthly housing expenses consisting of your mortgage payment (including principal, interest, taxes, homeowners insurance and mortgage insurance, if applicable) as well as homeowners association fees, mandatory maintenance fees, and common grounds charges in a development.

Back Ratio

The Back Ratio is similar to the front ratio but, on top of basic housing expenses, the back end ratio also includes your other monthly debt payments — particularly consumer debt payments — into the calculation. Examples of monthly consumer debts are your credit card bills, automobile payments, personal or student loans, etc. Examples of items not typically included in a back end ratio would be premiums for life insurance, health insurance, and car insurance.

Matching Your Ratio to Loan-Program Criteria

When evaluating your application, your lender is trying to match your application with the lending criteria for the mortgage refinance program in which you are interested to see if you qualify for the loan.

While there are many factors considered in determining how much money you can borrow and at what rate, your debt-to-income ratio is amongst the most important. A good-credit, conventional-mortgage program will very often have a debt-to-income ratio requirement of 33/38 – front/back, meaning that your monthly housing costs should be less than one third of your gross income per month.

Example

If you make $3,000.00 per month that means the maximum mortgage payment you could qualify for under a 33/38 program would be $1,000.00 per month inclusive of principal, interest, taxes, and insurance, as well as other housing costs. And, you will only be allowed a total monthly expenditure including mortgage payment, credit cards’ payments, and other consumer debt payments of$1,140.00.

That may seem very conservative, and it is.

Ratios’ Importance

If you’ve ever been turned down by a brick-and-mortar bank for a mortgage refinance, debt consolidation loan or for financing a new home purchase in Virginia, chances are it had something to do with your program’s low debt-to-income ratio.

Many modern lenders are not as concerned about the back end ratio at all and decide solely on the basis of the front ratio. In the case of a veteran’s VA loan, the guidelines only concern the back ratio and ignore the front. FHA loans allow you to carry more consumer debt, but with a higher income requirement — with a standard debt-to-income ratio guidance of 29/41 – front/back.

Refinance — Debt Payoffs

Debt consolidation programs can often make it much easier to qualify if you are willing to specify that certain consumer debt accounts be paid off directly, thereby reducing your monthly consumer debt payments.

Using a Refinance Loan Broker

Contact a nationally capable mortgage broker so that you have access to a wide variety of mortgage refinance programs in Virginia. Be honest with your loan officer about your earnings and debts and things will go smoothly. Remember, a mortgage refinance broker wants to get you the money you need in Virginia, and will work with you to make sure that happens.

Mortgage refinance Virginia

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