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Should older borrowers refinance?

December 21st, 2011

How old is too old to refinance? A recent Reuters article weighed in on the wisdom of Federal Reserve Chairman Ben Bernanke refinancing his mortgage loan at the age of 57, just two years after his last refinance. With interest rates near historic lows, some baby boomers may be thinking about refinancing their mortgage loans to improve their financial situation. Here are some things to consider before applying for a refinance when you are near — or even past — retirement age.

  1. How many years do you have left on your current mortgage? Each time you refinance you are setting back the clock on your mortgage loan amortization schedule. Starting over with a new loan means that most of your monthly payments will go toward interest payments during the early years of the loan. So decide whether it is worth it to refinance your current loan and stretch out the payment for a longer period of time.
  2. Can you refinance into a shorter term? Refinancing into a 15-year term could make sense if you have already paid down a lot of principal on your current home loan. Depending upon how much principal you owe, your monthly payments could actually increase with a 15-year mortgage.
  3. Are you still working? Being employed with a healthy income can improve your chance of getting approved for refinancing. Mortgage lenders are scrutinizing financial information of potential borrowers to determine if they are a good risk. Your credit score and other information such as savings and assets will factor into whether you get approved for a loan. If you have already retired, it will likely to tough to get approved for refinancing, but you may qualify for reverse mortgage. Reverse loans allow people aged 62 and up to convert some of their home equity to cash.

Refinancing a mortgage loan can work for some older people. But take time to compare several mortgage quotes to get all the information you need about doing a refinance so you don’t end up struggling to make monthly payments well into your golden years.

What to do before re-applying for a home mortgage

December 21st, 2011

Getting rejected for a home loan doesn’t mean you can’t reapply and get approved later. But before filling out another mortgage application, here are some things you may want to consider doing first.

Clean up your credit

Mortgage lenders have money to lend if you are viewed as a good credit risk. A credit score of 720 or higher will be viewed positively if you apply for a home mortgage. However, even a good credit score won’t save your application if you are underwater your current home loan or have too much debt.

Getting rid of as much debt as possible can help your loan application. That doesn’t mean shifting debt around from one credit card to another or transferring all of it to a debt consolidation loan. You need to actually decrease the outstanding balance owed to creditors for it to really impact your credit score. If you need help putting together a debt reduction plan, look for a reputable credit counselor that can help.

Save more money

Whether you are look to refinance a home loan or get a new mortgage to buy a place, the more cash you have at closing the better. Having a large down payment when purchasing can help you avoid mortgage insurance payments if your equity is going to be 20 percent or higher. If you don’t have enough equity to refinance to take advantage of today’s low interest rates, you may be able to get approved for a loan by bringing cash to the closing.

Get help with a home loan

If all else fails with trying to get a loan on your own, consider asking a parent or other relative for help. You may have a better chance of getting approved for a mortgage if you have a co-signer with a strong credit history. A co-signer is someone who agrees to be responsible for the mortgage loan if you aren’t able to pay it back. Even if your relative isn’t willing to co-sign, he or she may be willing to contribute money toward the down payment.

Home builders more confident in November

December 13th, 2011

Home builders grew more confident in November, compared with October’s figures. Confidence in the market for single family homes rose by three points to 20, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index was at its highest level since May 2010.

Housing market faces challenges

Bob Nielsen, chairman of the National Association of Home Builders, said in a statement:

While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to many challenges that home building continues to face with regard to the high number of foreclosures, the difficulty of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers. These problems must be addressed so that housing can contribute to economic and job growth the way it has in the past.

Qualifying for low-rate mortgage loans

The increase in builder confidence is related to the fact that homeowners who are able to qualify for mortgages are looking to take advantage of current mortgage rates, which have dipped to historically low levels. Borrowers with good credit may be more willing to hunt for a new home at a bargain price if they can obtain a mortgage loan at such low rates. The NAHB anticipates that builder confidence will continue to improve going into 2012.

Help for the housing market

The state of the nation’s housing market continues to be of concern to many people inside and outside the real estate industry. Speakers at the 2011 Realtors Conference & Expo said that the struggling housing market needs to be a priority of the nation’s public agenda.

“A healthy housing industry helps everyone in the country,” said Rep. Gary Miller, (R-Calif.) at the conference. The housing market has led this nation out of every downturn we’ve had in the past. Congress needs to focus on stabilizing the market, and that must be dealt with today and in a comprehensive fashion that will serve homeowners today and in the future.”