Refinancing a Mobile Home Loan

If you’re thinking about refinancing your mobile home, there are some important details that you should know in advance. Refinancing a mobile home can be a challenge, depending on your current situation. For instance, with the majority of mobile home lenders there is a minimum credit score requirement. Your existing credit history could end up being a big factor.

Another thing to be aware of is that with a mobile home loan, you will normally end up paying more in interest than you would pay with a traditional mortgage loan. This is because mobile home loans typically have a higher default rate. Here’s what else you should consider when refinancing your mobile home:

Why refinance your mobile home?

Before determining how to go about preparing to refinance a mobile home loan, you should first consider your reason for refinancing. This is especially true if your monthly payments are already manageable. Are you hoping to obtain a lower mortgage interest rate? Refinancing could lower those mobile home mortgage payments that you make every month. Needless to say, in the long run, you could actually end up paying less by refinancing.

Some mobile home owners opt to get a refinanced loan so they can switch from their existing adjustable rate. They may be ready for the stability that a fixed rate can offer. Obtaining the right kind of fixed rate may enable you to lock the amount in for the duration of your mobile home loan. Other reasons for refinancing your mobile home loan could be to modify a spouse or co-applicant’s name, or even to shorten the loan term so you can pay it off sooner.

If your mobile home is not affixed permanently to land, your original financing was probably the result of a personal property loan. This is a standard situation, because lenders won’t normally finance homes unless they are designated as “real property” by law. Since mortgage loans have lower interest rates than personal property loans, it makes more sense to try and obtain a mobile home mortgage loan. One way to try and do this is to seek to have your mobile home reclassified. That means permanently affixing your mobile home to a foundation that is approved by the Federal Housing Administration. Doing this will change the classification of your mobile home to “real property” and entitle you to a home mortgage loan.

Government help is available

When you decide to refinance your mobile home loan, be sure to look into the type of government help that may be available to you. There are several government agencies that refinance loans if you are a qualified mobile home owner. Freddie Mac is a government sponsored entity that has mobile home mortgage programs. They are well known for being one of the largest purchasers of traditional home mortgages. But not everyone realizes that Freddie Mac also buys and guarantees a number of mobile home mortgages each year.

If your mobile home qualifies as a permanent attachment to land, you may be eligible for a mortgage loan. Freddie Mac can help whether you’re a lender with a fixed or adjustable rate mortgage. Believe it or not, you can get help from the Federal Housing Administration (FHA), even if you are a mobile home owner. The FHA is responsible for enabling the banks to offer traditional homeowners a variety of low-down payment programs. Now more than ever, mobile home owners are also being encouraged to take advantage of these and other related financing programs.

What To Do If Your Mortgage Refinance Application Is Rejected

Just because a lender has turned down your application for mortgage refinance, you don't have to lose heart. In fact, by fixing the problems and improving your finances, you should be able to get refinance from another lender.

When a lender rejects your mortgage refinance application, the first thing you need to do is to find out why it was rejected. Fix those problems and apply again.

The lender can refuse your refinance application for several reasons. Here are the top five reasons:

-The current value of your home is less than the amount you owe on your mortgage.

-Your credit score may be less than satisfactory.

-You cannot prove your income.

-You have listed your home for sale.

-The lender suspects that you are not earning enough to cover your expenses.

While some of these issues can be fixed quickly, others may take time.

You are underwater

If you are underwater (i.e. the value of your home is less than the money you owe the lender) you have basically three options:

Tell your lender that you will make a down payment. So, for example, if the current value of your home is 90,000 USD and you owe 100,000 USD on your mortgage, you will have to make a down payment of $10,000 to cover the difference. In addition to this, you have to bring the customary down payment. Most lenders insist that the buyer should contribute at least 5% of the value of the property.

Make sure that the appraisal is accurate. All information (square footage, number of bedrooms, bath) in the appraisal should be correct. If there are amenities like a deck or a patio, a large lot or energy efficiency features, you need to ensure that they are properly valued.

The HARP refinance program helps homeowners who are underwater on their mortgage. See if you are eligible for that.

Your credit score isn't satisfactory

Lenders have increased the minimum credit score required for getting a mortgage. Your credit score may not have changed in the last few years; however, it may not be high enough to refinance your current mortgage.

If your credit score is lower than 620, getting a refinance is difficult. In fact, some lenders only consider borrowers who have a credit score of 660.If you have a credit score of 740 or higher, you will get the best possible rates.

How to increase your credit score

Pay your bills before they are due. You should also pay off your credit card debts.

Consider getting an FHA loan. These loans require larger down payments and may also have higher interest rates. However, they take borrowers with a low credit score.

You can't document your income

Lenders will ask you to prove every source of your income. In order to ensure that every source is considered, you should mention all sources of your income on your tax return. You will need to submit your income history of at least two years to refinance.

You don't earn enough

Lenders compare your monthly income and monthly expenses to determine your debt-to-income ratio. You can increase your ratio by reducing your expenses or increasing your earnings. You can perhaps borrow money from your relatives to pay off your debts. Or you should consider getting an FHA loan. An FHA loan will consider the incomes of other family members who are ready to co-sign the mortgage.

You have listed your home

If your property is already on the market getting a refinance is nearly impossible. However, many lenders will consider your application if you are ready to take the property off the market. Some lenders will make you wait for 60 days, even after taking the home off the market. If you have already listed your home for sale, you will probably want to find a lender who doesn't wait for 60 days.

If none of these strategies work, you should wait until the refinance boom ends. When lenders aren't all that busy, they are more likely to entertain your application.

 

Common Refinancing Options Offered by FHA

Now that interest rates are pretty low, many homeowners are looking to refinance their existing mortgage. Lenders have also sensed this interest in refinancing and are trying to attract borrowers by offering special schemes. While some lenders offer mortgage refinance with no-appraisal, others promise mortgages with no closing costs. This leaves the borrower confused.

How can a borrower decide which refinance program is the right for them? Interestingly, there is no such thing as a right or wrong refinance program. It all depends on your unique financial situation and goals. When it comes to refinancing, you have got mainly two options: the FHA Positive Equity Refinance and the FHA Streamline Refinance.

FHA Positive Equity Refinance

This is another refinance program approved by the Federal Housing Administration. This is the refinance option mainly offered by national home loan companies like PennyMac. 

The FHA Positive Equity Refinance is reserved for homeowners who have non FHA-insured home loans. In order to qualify for this refinance program, buyers should be current on their monthly mortgage payments. Homeowners who have negative equity on their home are eligible to get refinance through this program

The FHA Positive Equity Refinance will give borrowers a 30-year fixed rate mortgage. In addition, the borrower will be eligible for a reduction of at least 10% in their mortgage balance. There will be no closing costs.

In order to qualify for this refinance program, you need to meet the criteria specified below:

•        Your home loan is not backed or owned by Freddie Mac, Fannie Mae, FHA, USDA or VA.

·         The amount you owe on your mortgage is higher than the value of your property.

·         You make your monthly payments on time.

·         You qualify for the mortgage under the standard underwriting requirements specified by FHA.

·         The home is your primary residence.

·         Your total debt amounts to less than 55 percent of your total monthly income.

Borrowers who have been convicted of theft, fraud, forgery, felony larceny, tax evasion or money laundering in association with a real estate transaction within the last ten years are not eligible for this program.

FHA Streamline Refinance

This FHA refinance program is reserved for borrowers who have a mortgage insured by FHA. When you choose this program, you will get to adjust the term of your mortgage and interest rate. Better still, this program has relatively simpler underwriting requirements. That means there will be no new credit checks, home appraisal, or documentation. Since there will be no new home appraisals, this option is ideal for borrowers who are underwater on their mortgage.

Applying for this mortgage refinance program is relatively easy. You will qualify if you have a mortgage insured by FHA. Your repayment history over the last 12 months should be clean. You will also be required to prove that you didn't refinance in the last 210 days.

There is yet another requirement. The applicant has to prove that they will benefit substantially by getting a refinance. In other words, they should be able to reduce their monthly mortgage payment by at least five percent.

The Changing World of Refinancing

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.

Your credit score

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.

Five Tips to Get the Best Refinancing Deals

Fears of recession and widening debt crisis in Europe have lowered mortgage rates in the US. In fact, the current 4% rate on the standard 30-year fixed rate mortgage is the lowest in almost 60 years. Needless to say, many homeowners are planning to refinance.

U.S. banks now follow tight lending standards. Gone are the days when anybody could qualify for a mortgage. That said, if you do a little search, finding a lender is still possible provided that you have a credit score of 740 or higher and at least 20 percent equity in your house. Here are 5 tips to get the best refinancing deals:

1. Shop around.

Mortgage interest rates can vary widely, so do some research before selecting a lender. Rates shouldn't be the only criterion. Processing fees, too, can vary between lenders. Contact lenders in your locality and also ask relatives or friends to recommend a lender to you.

2. Think about closing costs.

Today's mortgage rates are pretty low. But if you already have a low rate, you should perhaps skip a refinance because a new loan may carry closing costs amounting to thousands of dollars. So, if you already have a 4.5% mortgage, you probably have no reason to refinance and get a 4% mortgage.

Before getting a refinance, you should think about closing costs. Ideally, you should refinance only when you can get interest rate cut by 0.5% or more. You should also calculate how many months you will take to recover your closing costs.

3. Beware of hidden costs.

All mortgage refinancing options have closing costs even if they claim that there aren't any. You might come across ads that say 'no closing costs'. You will still end up paying costs in one way or another. Closing costs are typically 1% of your principal amount. Lenders can work these costs into your refinancing deals in several ways.

Some lenders, for example, require borrowers to make an upfront payment. You will have to bring a signed check to cover the expenses. The lending institution will tell you how much money you need to pay. By contrast, 'rolled in' closing costs are added to your loan amount. You won't have to make an upfront payment, but you will have to pay slightly higher EMIs throughout the tenure of your loan.

"No cost" refinancing deals do not usually charge any closing fees; however, they have higher interest rates. It is impossible to say if one option is better than another. So the key is choosing a method that will work best for you.

4. Think about 'cash-in' refinancing.

During the property boom, many homeowners refinanced their existing mortgages to get larger loans. Since housing prices were soaring, they had enough equity in their properties. The housing boom, unfortunately, was followed by the housing bust. Now many homeowners are interested in 'cash-in' refinancing. They are swapping their existing mortgages for smaller ones bringing money to the table to make up the difference. These deals are helpful to customers whose home values have plummeted. By getting a smaller loan, they can increase their home's equity. This also allows them to qualify for refinancing.

5. Get a "rate-lock" confirmation.

Now that mortgage rates are ridiculously low, lenders are getting flooded with refinance applications. To protect your interests, you should get a lock-rate confirmation in writing. A "rate lock" sheet confirms the rate you are getting. It also mentions when the rate expires.