Refinancing Your Mortgage , Be Prepared for Documentation

There is a new sheriff in town in the world of refinancing your mortgage. The rules of refinancing have become much more strict, and lenders are having to make an adjustment in the way business is done. Mortgage rates and refinance mortgage rates will still be low, but qualifying is not what it once was.

Mortgage rates are now flirting with the lowest levels they have seen in almost a generation. Refinancing your mortgage now and you could literally save thousands of dollars over the term of your loan, while enjoying the lowest interest rate of your life.

For the rest of 2009, 30 year fixed rates should be near 5 1/2%. 15-year rates generally averaged about half a point lower. ARMS, yes, ARMS are still available and if you know how to use them to your advantage they could make a lot of sense. Especially if you know how long he will be in the home and either move out or refinance before the initial fixed rate expires.

The question raised most often by potential home buyers is what kind of interest rate will I get on a mortgage or a refinance. To compound matters the recent economic downturn has put many people in a situation where they’re having to shop for bad credit mortgage lenders. While those kind of bad credit lenders do exist, the documentation that needs to be provided for such a loan is extensive and frustrates some borrowers.

That being said credit scores above 720 and a 20% equity stake in your home will likely get you the best mortgage rates available. Credit scores less than 720 will generally pay a half a point or so higher.

When you apply for a refinance mortgage or a new mortgage, you must provide pay stubs from her recent month, your bank and other financial statements for at least two months, and W-2  statements for at least two years. If you are self-employed is likely you will need an additional two years of tax returns showing self-sustaining income. The days of no documentation loans for mortgages and refinance are over. Those types of loans are blamed for the housing bubble and it’s not likely they will be coming back anytime soon.

Locking your rate once you are approved is still a judgment call. It will get down to your threshold of risk tolerance because the possibility exists that your rate may go up if you don’t lock it in, and you may miss out on the benefit of a going down if you do. You can ask about a float down option. This option entitles you to capture the lower rate before you close a loan should be interest rate go down. However, this option is not free and nonrefundable fee of $200-$300 is generally the cost, but you can save thousands of dollars over the life of your mortgage.

In conclusion, refinance mortgages and new mortgages are available, perhaps not as many outlets as once before, but they are available. Be prepared to spend a little more time in the application process, as lenders and mortgage planners everywhere tightened up on procedures that may have gotten him into trouble in the past.