Mortgage rates are at an all-time low, thanks to the Federal Reserve’s efforts in March — buying unlimited amounts of bonds and supporting lending. Their actions included two rate cuts that were part of the central bank’s broader work to protect the economy from more financial damage due to the COVID-19 pandemic.  The rate reductions were designed to stimulate the economy through the worst of the pandemic. The intent was to help people until they were able to work and receive full paychecks again.  Depending on your scenario, refinancing may be a stellar option to help you lower your monthly payments and come out of this pandemic more financially confident than when it started. 

Refinancing

Refinancing is currently a popular option, therefore lenders are enduring heavy workloads.  The best way to ensure your application is processed quickly is to have all your paperwork together. 

Paperwork Needed: 

• Income Documentation including the last 2 years of W2’s and 30 days of paystubs. If you are self employed, tax returns will work. 

• Mortgage Statement 

• Homeowners Insurance Information 

You can use our refinance analysis tool and be in touch with an agent in just a few minutes. 

Reasons to Refinance:

• Lower Interest rates mean it's less expensive to borrow money. This provides you with an opportunity to come out ahead. Some borrowers may even be able to shorten the term of their loan and substantially lower their rate, which creates a win-win for the consumer. 

• Eliminating mortgage insurance can lower your monthly mortgage. This is especially appealing to FHA homeowners because it gives you an opportunity to move into a conventional loan.  You would still need 20% equity in your home, but saving the assumed 1% of PMI that stays for the lifetime of your loan might be the extra money you need to make ends meet throughout this crisis. 

• There is no better time to switch from an adjustable rate mortgage to a fixed rate. Floating mortgage rates can be a nuisance at times. However, with rates dropping to all time-lows, getting locked into a rate now would secure your loan at the lowest possible rate for you. 

• Lowering the term of your mortgage. If you have 20 years left on your 30 year mortgage, it’s possible that you could refinance into a 15-year conventional.  The 15-year conventional may provide equivalent or even lower than your current monthly mortgage payments with these interest rate drops.  The only way to know what you could qualify for is to go over your specific case with a loan officer. 

Crucial Tips To Refinancing: 

• Know why you’re refinancing. You might be looking to get a lower monthly payment, to shorten the loan term, replace your adjustable rate with a fixed rate, to borrow more than you owe in a cash-out refinance, or to get rid of FHA mortgage insurance. Any of these are great reasons, but knowing your ultimate goal will help your loan officer find the option for you. 

• Shop more than one lender. You’re more likely to land the best possible deal if you apply with multiple lenders, which is why choosing People’s Choice Mortgage is a great solution. We work with over 80 banks to ensure we can get our clients the lowest possible rate or deal for them. 

• Listen to your loan officer’s advice about locking your rate. In normal times you can lock in a rate when you apply, but with the market in turmoil, some lenders won’t let you lock until later in the underwriting process.

• Avoid a Cash-Out Refinance if possible. You might be in a rush and stressed about finances due to losing a portion of income through this crisis. However, you may want to keep the equity you have in your home as a cushion in case you truly need it or decide to sell your home. 

How Long Does a Refinance Take? Refinancing is very similar to the process you went through for your initial mortgage. The exact amount of time the process will take depends on your lender and market demands. 

Common Misconceptions About Refinancing: 

• You need cash to cover closing costs. Most of the time you can roll closing costs into your loan. Any loan officer can walk you through this process. They can give you options on how to do this and what this will mean for your monthly payments. 

• Refinancing is extending the time I pay on my loan.  The terms for refinancing can be anywhere from 8-30 years. Talking with a loan officer about your financial goals, credit, and ideal terms of a loan can help our loan officers guide you into a loan that will work for your specific needs. 

• You can’t save that much when refinancing your home. Depending on your current loan and interest rate, you could save tens of thousands or even upwards of hundreds of thousands. Reducing by just a fraction of a percentage may save a significant amount over the lifetime of your loan. 

• Your current lender has your best options. You can’t know your best options if you don’t research them.  That’s why a brokerage is key to saving you money throughout the lifetime of your loan. 

• You have to have at least 20% equity in your property. This is simply not true. Loans with less than 20% may still require you to pay PMI, but depending on your goals, you may still be able to save yourself either on the lifetime of your loan or the monthly mortgage amount. 

Every loan is different and therefore there are always a bunch of different ways to save you money. PCM has an edge over your local bank and other brokerages because we work with 80+ lenders. We are able to educate you on your options and make sure your long term goals can be met. If you are in need of some sound financial options on how to get through this time, or you are just ready to take advantage of some great opportunities this unfortunate time has brought, contact us today and start the process. Our team is always available to help educate you on what it will take to meet your financial goals in homeownership.