In the mid 2000's, getting a mortgage was a whole lot
easier. Back then, borrowers were not required to have a good credit history.
Even those who couldn't afford to make a down payment could get a home loan.
The underwriting norms were rather relaxed and more people
could buy homes or get their existing mortgages refinanced. Some borrowers who
saw good appreciation in the value of their homes drew out some of their positive
equity and splurged that money on luxury cars or boats.
But then the recession arrived.
During the recession, several people lost their jobs and
consequently many of them had to default on their mortgage payments. The value
of properties, too, eroded. This forced banks to become more cautious and
selective. Now getting refinance is not all that easy. Serial refinancing has
become a thing of the past.
Recovering economy
The economy soon started showing signs of recovery and many
people who lost their jobs during the recession are back to work. The value of
homes, too, has increased. This has encouraged banks to relax their lending
norms a bit. Now homeowners who are underwater on their mortgage payment are
eligible to get refinance if the value of their home is slightly higher than
their original loan amount. Even owners with negative equity are now eligible
for refinance through HARP 2.0.
If you are planning to get a refinance, you should be prepared
to deal with a lot of paperwork.
Refinancing now
Refinancing your existing mortgage is now difficult. It is
still possible, but now banks have more stringent underwriting norms. Gone are
the days when they would readily approve each and every application.
More paperwork
Refinancing now involves a lot of paperwork. Banks now
require detailed documentation of your income because they are legally responsible
to prove that you will be able to repay the loan. As a result, the borrower now
has to submit additional documents like tax returns, pay stubs and bank
statements.
Ten or 15 years ago, people who had little or no credit were
eligible to get a home loan. But now you
need a good credit score. If your credit score isn't satisfactory, you should
improve it before trying to get refinance. You should also get a credit report.
There may be errors or inaccurate information in it. Your credit score will
improve when you get those errors rectified.
Borrowers should also have a good idea about the value of
their home.
Longer waiting
periods
Now that rates are at their historic low, lenders are
getting flooded with numerous home loan applications. Consequently, getting an
approval now takes much longer. You can, however, speed up this process by
responding quickly to document requests. Any delays on your part can cause your
rate lock to expire. You will probably have to pay extension fee as well.
If you are paying too much interest on your fixed-rate
mortgage, you are a good candidate for refinancing. When you refinance, you get
to enjoy the lower rates. While choosing a refinancing deal, don’t forget to
compare rates and fees. To get the best possible deals, you need to stay
abreast of the latest happenings in the world refinancing.
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