Refinancing Your Home Today, Is It Out of the Question?

From on February 27, 2009 in General Remodel

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Homeowners who are considering refinancing their homes to lower their interest rate or start a remodeling project might be in for a grueling experience when they sit down with their lender. It’s no secret that lenders have tightened their lending belts. Gone are the days of the stated-stated or no-doc loans. Some homeowners give up the refinance dream before ever seeking a lender because they feel it’s just not worth it. The question is - is it out of the question? Is refinancing still a possibility?

That depends.

Where is your home located? There are ground zero zones that some banks won’t touch such as Stockton & Fresno in California – even if you have equity built up.

What’s your credit like? If you have equity in your home but your FICO score is less than perfect you still have the option of an FHA loan, which is not credit score driven.

How much equity do you have? If you don’t have any equity then you can’t cash out. If you’ve owned your home for over ten years you might have a few bucks in equity but, remember, you’ll pay closing costs and escrow fees. If you refinance a home worth $700,000 and there’s a .5 point origination fee you’ll pay $35,000 plus other charges.

Job security – how long have you had your job? Lenders are looking for stability.

Refinancing your home isn’t out of the question and it’s definitely worth a shot if you have equity. Some variables, such as credit scores, can be worked out through an FHA loan. Every bank is different, which is why brokers come in handy; they do the shopping for you and they know each banks strengths and weaknesses. One bank might lend on 75% of the value of your home while another bank might only lend 70%.

When it comes down to it, you’re selling yourself to the lender. Anything and everything you can gather to make your case on why they should refinance your home will be a plus on your side.

In September, 2006, we refinanced our 2nd mortgage and took cash out. The bank we were working with handled the appraisals in-house. The appraisal came in $30,000 less than what we thought our home was worth. I got in the car and drove by the homes that were being used as comps and took pictures. I also did my homework on each house to find out why some of them were so under priced (dragging down our value). I had also been inside some of the homes during open houses so I had firsthand knowledge of the condition of these properties.

The biggest hurdle was a home that was 300 square feet bigger than ours with a bigger lot that had sold for much less than the value of our home – and it was only two blocks away. The picture I took showed that this house was a boring square 50’s house with a converted garage vs. the picture of our charming English Tudor and award winning landscaping. I also included a detailed account of the interior of the 50’s house and explained that it had been on the market for over a year and looked as if renters had lived there. The interior was dated, dark, and looked vandalized. I won the case and the appraisal was adjusted up where we needed it to be.

Hopefully you’ll be able to refinance and start that dream remodeling project – just don’t give up before you even start. People get refinanced every day, so why not you?

Photo showcases the exterior painting work of Certa Pro Peninsula/SouthBay