Been Turned Down for Refinancing?

If there’s one point we’ve been trying to hammer home these past few weeks in our blog entries, it’s that now is the time to refinance your home loan.  With mortgage rates on the decline, more and more people are looking to refinance now while they have the best chance at it.

But what about those who have already tried and been turned down for refinancing?  Here are some of the more common reasons consumers are turned down for refi options – and what they can do to overcome them.

You lack equity

Even if you’re not completely underwater financially, you could still be turned down for a refi if you don’t have enough positive equity among lenders.  Remember, just as you needed enough funds for a down payment, lenders also like seeing you have money of your own tied to the house before they’re willing to look at approving a refi.

So how can you overcome this?  Bring in some more money of your own to the table.  Say your home is worth something in the neighborhood of $200,000, and you owe $190,000 on the mortgage.  Your lender says he needs 10% equity for a refi, meaning if you can bring in an additional $10,000 you could reduce your loan amount to $180,000.  Of course, that leaves you with the problem of coming up with that kind of money, but we’ve got a few tips for that as well.

You can also try an FHA loan if you are barely treading water on your payments.  FHA loans only require a down payment of 3.5%, so there’s much less of a monetary pressure should you try that route.

You have bad credit

If you’re refi application was turned down on account of your bad credit, you’re only option is to work to improve it as quickly as you can.  Fortunately, this isn’t as daunting a task as it may seem – all it takes is time and patience.

Assuming you don’t have a major mark on your credit report like a lien or bankruptcy, most negative information on your report starts losing its grip after 2-3 years.  Use this time to focus on paying your bills on time –consider calling your credit card providers to find out when they report your information to the bureaus every month, and adjust your payments accordingly to speed the process up a little.

Got some refi tips of your own to share?  We wanna hear them!  Give us a shout out in the comments!

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Home Loans: Refinance Now or Wait for Another Rate Drop?

It’s a question we get asked on more than one occasion – especially in a market that has more ups and downs than your average Six Flags rollercoaster: Should I refinance my home loan now, or hold off for a couple more weeks and see if the rates fall back down again?

We certainly don’t blame consumers for asking such a question and giving any answer we give them the utmost scrutiny; after all, many experts have been claiming for a while now that the mortgage rates have finally bottomed out, only to see them fall further and further down into the hole.

Thankfully though, that doesn’t seem to be the case with this newest round of rate drops.  While the rates had seen a recent spike based on indications that the Federal Reserve would be scaling back its economic recovery boosts, many are now speculating the rates could cool down if the economy slows its course over the summer.

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So what does all this mean for you?

If you’ve been hesitant to pull the trigger on a home refinance up until this point, you should know that now is as good a time as any to take another look at your mortgage rates, while keeping an eye on the market as a whole.

You’ll want to try and lock in your current rates now, but also make sure you remember to ask for a provision for the loan to float.  What this essentially means is that, not only are you protected in case the loan rates continue to climb, but you’re also afforded the opportunity to re-lock you loan at a lower rate should it continue to spiral downward.

You can also lock you rates in and pursue the mortgage application process the conventional way.  If the rates should fall any lower between now and the time the refi is approved, you can then attempt to renegotiate a lower rate with your lender.

Got some refi tips of your own to share?  We wanna hear them!

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Making a Down Payment on your Home Loan

Making a down payment on your home loan can be the biggest obstacle many first time home buyers face.  Considering also the fact that different loan types require different amounts needed for a down payment (ex. a big bank might require as much as 20% for the down payment, while a FHA loan on requires a borrower pony up 3.5% for a payment), and you start to get a clearer picture of why coming up with the money for a down payment can be one of the more stressful aspects of buying your home.

Over the next couple of posts, we’ll be sharing some of the best tips for putting together a down payment we’ve seen yet.  Here are a few now:

  • Hold onto that tax refund!  Believe me, I know how quickly a tax refund can burn a hole through one’s pockets, but if you’re set on buying your very own home every little bit helps.  If saving money itself is a tricky proposition for you, another route you can take is changing your withholding exemptions from one to zero.  This will reduce the amount you receive on your paycheck, but it will equal out to a higher income tax refund, which can mean the difference in a down payment.
  • Ask mom and dad for the money!  C’mon, you know they’re good for it!  Seriously though, you shouldn’t feel bad about asking your parents to help a little with the down payment if they can.  Considering the favorable laws we have regarding taxes on gifts (any amount gifted under $10,000 isn’t subject to taxes), it certainly can’t hurt to try.
  • Time for a garage sale!  Let’s face it: No one really knows how much stuff they actually have until they have to pack it all up and move it somewhere else.  For most of us, it’s usually a lot more than we may realize.  You can easily kill two birds with one stone here by holding a garage or yard sale.  Look around for anything you never use anymore and put a price tag on it.  Not only will you be subtracting a lot of the clutter, you’ll be adding to your down payment as well.
  • Save a little!  As my dad used to tell me, the best way to build up a savings account is to put a little of each paycheck away until you’ve saved enough.  He used to recommend I put away 10% of every paycheck.  While that might not sound like much at first, consider that if you’re able to put away, say, $200 of every biweekly check you receive for a year, you’ll have saved over $5000 for a down payment.

Check back in the next couple of days for even more tips for saving up for your first home down payment.

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How Negative Credit Can Impact Your Mortgage Loan Chances

Picture this, if you will: You’ve been on a house hunt for a while now and, after much trial and error and a pretty exhaustive search, have finally found your dream home.

Now normally, this is the part of the story where something goes wrong, and the carpet’s pulled out from under you before you can even pay for it. But that’s not gonna happen this time, cuz you came prepared!

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Your FICO score’s up there with the best of them, so you confidently fill out the long list of necessary paperwork to apply for a mortgage loan, and afterwards, stop by IKEA to start looking for new furniture.

A couple of days later, you finally receive a phone call to let you know that your mortgage application has been denied. Whoa, wait, what?

What happened?

You filled out your paperwork correctly, and your credit score is higher than most, so why was your mortgage application still rejected? Thanks to the current mortgage crisis, many consumers are finding that simply having a great credit score isn’t getting them as far as it once did. Banks are now much pickier about who they’re lending money to.

Unlike the lending days of yesteryear – where it seemed anyone with a source of income could apply for the best house on the block – banks and lenders are now going through each home loan applicants’ actual credit reports with a fine-tooth comb, looking for ANYTHING that might paint you as a financial risk in their eyes.

So if your high credit score alone is no longer good enough for lenders, what else are they looking for?

• Not enough income. You may have a great credit score, but your credit accounts and reported income gave away the fact that you won’t be able to cover your monthly mortgage payments. No money, no mortgage.

• Your credit accounts are too young. If the majority of accounts posted on your credit report haven’t been active for at least a year, it could seriously damage your chances of getting approved. Banks and lenders like to see that you have a history of positive credit under your belt – some preferring accounts as old as 2 years, and polished to perfection.

• You have outstanding judgments on your credit report. This is where credit repair comes in handy. Having just one of these can halt your chances of getting approved for a home loan before you’ve even started looking. Judgments can stay in your credit history for at least 7 years, and if a title search is done, can bring the process to an abrupt and rather unsatisfying conclusion.

Wanna make sure your credit and finances are up to par for a mortgage loan?  We’ve got a team of experts that can help you prepare! Contact us today.

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Why Purchase A Home?

With all this talk from a San Diego mortgage company about refinancing and home buying – and all the work that goes into securing those deals – some of you might be left wondering why even go through the hassle of purchasing a home in the first place.

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I mean, if buying a home and later trying to refinance it down the road takes as much time and energy as we’ve detailed over these last few posts, why bother in the first place?  Why not just stick with apartment living; that’s gotta be much easier, right?  Sure, if you like being packed into an industrial-sized sardine can with large groups of your fellow man above and below you, all day every day.  Oh and look, the neighbors in the unit right next to yours just bought their 5-year old son and drum set for him to play with – isn’t that just precious?

Still wondering why you should bother buying a home at all?  Well, here are a few more reasons for you to consider, just in case:

  • You get to be a proud homeowner!  This is the numero uno reason most people give for wanting to buy a house.  And why wouldn’t it be?  Having your own home means no pesky neighbors on the other side of paper-thin wall (now you’ve got a whole YARD between the two of you!), getting to turn the volume on your TV up as loud as you want, paint the walls and ceilings, and remodel the hell out of that kitchen and master bathroom.  It also gives you a real sense of stability and security that you don’t have with any rental property.
  • It’s a great investment!  Buying a home now isn’t just the best option for putting a roof over your head – it can also be a sound financial investment for your future.  Like any industry, real estate is pretty cyclical; it has its ups and downs, but for the most part, a home will appreciate in value, and your investment can be a great way to hedge against any inflation.
  • You get all kinds of deductions!  Another reason most people tend to prefer home buying vs. renting is because our tax rates generally favor homeowners over everyone else.  Assuming that the balance of your mortgage is lower than the price of your home, the interest on that mortgage is fully deductable on your tax return.  And if this is your first home, your real estate property taxes are fully deductable as well.

Have any thoughts on your own about buying vs. renting?  Let us know what you think in the comments!

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