Your Home Is Worth More Than You Think!
When it comes to real estate, things actually aren't so bad here in Denver. Our guide to the myths and realities of the local market will show you why. Plus: How to refinance your mortgage, remodel on a budget, and rehab your IRA with real estate investments.
How to Take Advantage of Historically Low REFI Rates
By Joe Lindsey
With interest rates for 30-year fixed mortgages hovering around five percent, there's arguably never been a better time to refinance. Here's what you need to know.
Identify an Entry Point
Ask your mortgage broker how low rates need to go to justify a refi. You want a monthly payment that's low enough to recover closing costs in 12 to 18 months.
Set Your Financial House in Order
Get comparable sales info as a prelude to an appraisal, and get your FICO score to eliminate nasty surprises.
Expect Stringent Underwriting Standards
Fannie Mae and Freddie Mac now assess progressively higher rates or fees for every 20-point drop below 740 on your FICO score, even on refis, says Bill Rodriguez of the HomeW.I.S.E. Team at Cherry Creek Mortgage Company. Homeowners with nontraditional incomes (like the self-employed) may have a harder time qualifying.
Pay Points if You Have to
A "point" is an upfront payment of one percent of the loan's value; in return, the lender "discounts" the interest rate by about a quarter percent. Normally, the payoff time is too long to justify this approach on a refi (where points are tax-deductible only over the 30-year life of the loan). But interest rates on no-point loans are high enough that you may get a better deal paying a point or two in exchange for a lower rate.
Hope Your Neighbors Are Keeping Up With the Joneses
In areas with high foreclosure rates or plummeting values, lenders may reject even qualified owners on a refi. Lou Barnes, owner of Boulder West Financial Services, says lenders are now looking at "micro-neighborhoods, sometimes intra-ZIP code," something he's never seen before.
Rates are fluctuating wildly, but don't try to time the market. "If you get to a point where you can refinance into a solid fixed-mortgage product and recoup your costs quickly," Barnes says, "close your eyes and proceed."