Houston Refinance Mortgage Information
There are three main reasons that consumers consider a Houston refinance mortgage. They are lower rate, cash out (or debt consolidation), and converting from adjustable to a fixed rate.
For a rate refinance an important consideration is the closing costs to be paid. If there are typical closing costs it is usually advisable to refi if you can save ½ percent on your rate or more. With a “no closing cost” loan it can make sense to refi with 1/8 percent savings or more. The no closing cost option is not always the best choice. If a mortgage with some closing costs is obtainable at a better rate you should consider the payback time. This is a calculation of how long it would take a rate savings to retrieve the closing costs. If the payback is 4 years and you plan on having the loan longer than that it may be the better deal.
For cash out refinancing there are rules that are commonly called “Texas cash-out” rules. The meaningful part of this is that the loan may not go beyond 80% of your homes appraised value. For example if your home is worth $100,000 and you currently have a $50,000 mortgage, the maximum cash out would be $30,000 (less closing costs). It is usually not advisable to do a cash out refi if it would consequence in a higher rate than you currently have. If you can’t get a equal or better finance rate it may be better to do a second mortgage or home equity line of credit instead (HELOC). Ask a good loan officer or mortgage broker to show you options and explain the differences.
It is usually advisable to transform from an adjustable to a fixed rate mortgage only if the fixed rate is equal or better. Some adjustable rate loans have a prepayment penalty the first two or three years. In some situations it can be best to wait until after the penalty clause expires to refinance.
For all refinance mortgages it is important to get the best possible rate and terms. Your credit, income, and loan to value ratio will be factors for your rate and terms. Your goal should be to get the best program that you qualify for. There are a lot of mortgage programs obtainable in the marketplace. In general the best include some Fannie Mae/ Freddie Mac programs, and VA conforming loans. Next might be other traditional “A” mortgages or FHA loans which are very good. Alternate A loans are next, these are loans that don’t quite fit the top tier because they are very large (jumbo), or for another reason like not documenting your income. Next could be Fannie/Freddie programs that are for those with less than perfect credit (sometimes called A- mortgages”). Next to last would be “sub-chief” loans. These are for consumers with more difficult to finance mortgages because of credit or other reasons. The lowest category could be called “hard-money” loans. Some lenders will do this kind of mortgage at a high rate in spite of of harsh problems if there is a large amount of equity.
I suggest dealing with a lender that has a large variety of programs to select from. If you shop a lender that only does one kind of mortgages you will probably be turned down if you don’t fit their program. When you shop a lender that doesn’t do FHA loans, they may suggest a lower category mortgage with a higher rate. And it is better when a lender offers a choice of programs, instead of just one.
Texas residents can visit our Houston refinance mortgage site for more information. You can also call my office at 281-537-7800.