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Surrounded by a sea of refinancing confusion.................2 Basic terms I need to know about refinancing.................3 When should I refinance my home mortgage? ................6 Be aware of refinancing myths.6 Things to consider in refinancing my home ..7 Should I refinance my ARM? ...7 What is involved in refinancing my home mortgage....7 Example of savings from refinancing..............................8 What if Im still not sure I should refinance? .................9
Credit Report A document completed by a credit-reporting agency providing information about the buyers credit cards, previous mortgage history, bank loans, and public records dealing with financial matters. Deed The formal written document that transfers the rights of ownership and possession (the title) from the seller to the buyer. Discount Point A unit of measurement used for various loan charges; one point equals one percent of the amount of the loan. Down Payment The difference between the loan amount and the sales price of the home you are percentagefor example: a 3 percent down payment on a $70,000 home would be $2,100. Equity The owners interest, or the amount of cash the owner has, realized, paid in, or invested in real estate. Escrow Payment The portion of a borrowers monthly payment that is set aside by the lender in an escrow account to pay the taxes, hazard insurance, mortgage insurance, ground rents, and other special items as they come due. FHA Loan A loan that is insured by the Federal Housing Authority. This type of loan is geared toward providing mortgages for moderate to low income families and is subject to the qualifying guidelines set forth by the Federal Housing Authority. Fixed-Rate Mortgage The type of loan where the interest will not change for the entire term of the loan. Good Faith Estimate Provides a breakdown of the estimated closing charges. Home Equity Loan A loan under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property. Interest Rate The percentage of interest charged on the amount of money borrowed. This rate will vary slightly from lender to lender and will vary according to the type of mortgage chosen (30-year fixed, 3-year adjustable, etc.). Now is an excellent time to refinance with rates that are the lowest in over 30 years! Loan-to-Value Ratio (LTV) The ratio, expressed as a percentage, of the amount of a loan (numerator) to the value or selling price of the property (denominator). Usually the higher the percentage, the greater the interest charged. Origination Fee The fee that the lender charges the borrower to cover the cost of issuing a loan commitment. It pays for processing the loan which includes collecting information about the borrowers creditworthiness and the property. The fee is usually computed as a percentage of the mortgage loan. It usually does not include fees for appraisals, credit reports, inspections, and loan document preparation.
Points An amount equal to one percent of the principal amount of a note. Loan discount points are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a competitive position with other types of investments. Pre-Paid Costs These are the costs that cover your escrow account for the future payment of interest, property taxes, and homeowners insurance. Property taxes are set by the appropriate government taxing authority and, unfortunately, are not negotiable. Depending on the regulatory agency (FHA, Fannie Mae, etc.), you will be required to prepay anywhere from 2 to 11 months of property taxes at closing. Premiums for homeowners insurance are set by the insurance company you select, and you are required to pay your first years homeowners insurance plus two additional months at closing. You can usually figure on your prepaid costs being approximately 1 to 1 percent of your loan amount. Private Mortgage Insurance This insurance is required for most loans that have a down payment of 20 percent or less. Private Mortgage Insurance insures the lender in the event that you default on your mortgage payment and the lender is forced to sell your property at a loss. Title The evidence of the right to, or ownership in, property. In the case of real estate, the documentary evidence of ownership is the title deed which specifies in whom the legal state is vested and the history of ownership and transfers. Title may be acquired through purchase, inheritance, devise, gift, or foreclosure of a mortgage. Title Insurance An insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title. This is a one-time charge for the policy and is required on every purchase or refinance transaction. Underwriting In mortgage lending, the process of approving or denying a loan based on an evaluation of the property and the applicants creditworthiness and ability to repay the loan. The underwriter analyzes the risks involved and selects an appropriate loan term and interest rate. VA Loan A loan that is insured by the Department of Veterans Affairs. This type of loan is available only to veterans and is subject to the qualifying guidelines set forth by the Department of Veterans Affairs.
Existing payment Payment after refinance = Monthly savings Refinancing costs Monthly savings = Months to recover cost
There are some situations in which a refinancing decision should invariably be made. If you are able to negotiate a no-cost mortgage (you pay no points or closing costs) and if the new mortgage rate is lower than your existing rate, then refinancing your loan may be of financial benefit to you. If the remaining mortgage balance, including points and closing costs, can be refinanced at a reduced monthly payment and still be paid off within your existing mortgage payment term, then refinancing would be advisable. Lastly, you can generally count on it being time to refinance when your new mortgage rate is at least one to two points lower than your existing rate and you plan to stay in your home for at least three to five years. However, sometimes refinancing can be accomplished with a NO RISK REFINANCE that costs no money out of pocket, and adds nothing to the principal balance. Ask your Churchill loan officer about this program.
You need to expect that your home will have to be appraised again and possibly be inspected. Your credit history will be reviewed again, and there will probably be changes in your mortgage and title insurance. Of course, money doesnt just grow on trees; but if it is truly the right time for you to refinance, then with the money you will be saving after 12 to 18 months, you should begin to feel like your money trees are in full bloom!
Churchill Mortgage can assist you and make sure you avoid making costly mistakes in obtaining your financing. We underwrite and fund the majority of our loans in-house. What that means for you is that we have the opportunity and ability to offer a variety of methods in financing to fit every clients needs. We hope that this information is useful to you in your pursuit to purchase, refinance or build the home of your dreams! We have learned that the best way to serve you is to think of ourselves as your Super Servant. You have our guarantee that we will carefully listen to your individual needs and work our hardest to get you the best deal around. We want to be your Personal Lender for Life!