Don’t Underestimate What You Don’t Know

I love to learn and each day it seems I learn something new. My work is a prime example; after almost four decades in lending there are new programs, changes in programs or rules that impact the home purchase or the refinance process.

Here is a recent lesson. There has been significant home appreciation in the Rogue Valley over the last year. I thought that someone who purchased a home early last year would not be a candidate for refinancing, rates were very good then as today. But with the appreciation comes the opportunity to remove the mortgage insurance. Refinancing can be a viable option.

Mortgage insurance is required when a borrower does not put twenty percent down on a loan in most cases. And with Federal Housing Administration (FHA) loans the mortgage insurance stays on the loan usually for the entire length of the loan, so refinancing an FHA loan has merit.

Do you or someone you know have an FHA loan? Perhaps I should run the numbers and see if we can get out of the expensive mortgage insurance.

I am helping a couple with a refinance; they will be saving $267 a month. I ran the numbers and told them that if they kept the payment amount the same and put the savings towards the principal of the loan they could cut a 30-year loan into a 20.5-year loan. Knowledge is power.

Sometimes mortgage insurance can be avoided. On a loan recently closed the offer was structured with the seller carrying a second mortgage, this allowed the borrower to put down less than 20% but still avoid the mortgage insurance. The borrower of course had to qualify for both the new first mortgage as well as the second, but it was a way to eliminate the cost of mortgage insurance. 

Here are a few fun facts about loans that are not commonly known.

On a VA transaction the seller can pay off some of the buyer’s debts to help qualify for the loan.

The seller can pay the closing costs and prepaid reserves on most loan programs meaning the buyer only has to have the down payment.

You can borrow the down payment if it is secured; example, you have an RV free and clear and borrower against it, that money can be used for down payment and closing costs, but please note, the loan has to be secured, you can’t get a cash advance on a credit card and use those funds to buy and you must qualify with the new RV debt accounted for.

So don’t assume you can’t buy a home. Talk to an expert and explore your options!

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