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Consumers Tips Refinancing Home Loan

Prepare for loan processing settlement, closing  and disbursement delays. Typically can take up to 45 days from online application submittal to closing.  It's best to anticipate the full duration of time a loan can take to process.  Major transactions commonly produce delays. Loan processing can take as long as 60 days or more.  Common delays are due to filing and retrieval of government certified documentation.  When shopping rates and settling on a lender request an immediate lock-in of 60 days or more. A number of loan programs allow for no fee lock-ins.

Exercise care to ascertain if the lock-in is actually free of charge of if it is contingent of particular rates and point levels. Carefully examine loan docs to see if a fee is being charged. 

KNOW YOUR RIGHT OF RESCISSION

At times closing documents may not be to your satisfaction. You have the right to back out of a deal so long as it adhere to the right of rescission clauses in your jurisdiction.  Normally you have three business days from the date of closing to opt out of a loan deal. If you decide to reject the deal, the lender must be notified in writing within the three-day period. Your fees are then returned to you in 20 days.

 LITTLE EQUITY IN YOUR HOME DOES NOT OF ITSELF DISQUALIFY YOU FROM REFINANCING.

As a protection lenders normally require that you have at least 10 percent equity in your home. This is often referred to in lending terms as 90% LTV, a loan-to-value percentage. Still some lenders allow a 95% LTV or 5 percent equity in the home.  With such loans PMI issues may give rise to higher mortgage insurance costs.

Fannie Mae or Freddie Mac owned loans make this allowance. To find out if your loan is owned by these organizations contact the company that receives your mortgage payments and ask them to retrieve the appropriate data.  

INTEREST RATE COMPARISON SHOPPING

It's important to know that an 8 percent rate tied to 0 points is a less expensive than an 8 percent rate tied to 2 points.

When comparing different rates and points offered by competing lenders, use the following formula.  Each point would be the difference of 1/4 of 1 percent of the interest rate. In other words if you have an interest rate of 8 percent with 0 points this would be the equivalent of a 7.75 percent loan with 1 point.

BEWARE OF NO COST LOANS

For some situations no cost loans can be the difference between getting a loan or failing to qualify for lack of ability to pay up front loan costs.  Certain programs allow for this situation with what is called "no cost loans".  One should be careful however in the understanding of how these program actually work.  No cost loan fees can be quite exorbitant  at closing. 

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