Its no secret that we are currently in the middle of a refinance on our mortgage. Its not exactly something I was planning to do though. I had heard that rates have been pretty awesome lately, but I did not think we were in a good spot to qualify for a refinance since we have way too much debt (althought we do pay it all on time!).
A couple weeks ago I received a letter in the mail from our current mortgage company talking about lender paid mortgage insurance vs owner paid mortgage insurance, and how we should consider getting a new loan to save money. It was extra confusing to me because we currently have an 80/20 loan. The whole point of the 80/20 is to avoid mortgage insurance!
I promptly called the bank to see what the heck the letter was all about. The representative that answered told me the mortgage department was closed and she could not help me at that time - but I was welcome to call back the following morning.
So I did what every frugal, internet savvy woman would do...I ran to google!
I never did figure out what they were talking about on that letter! Instead I figured out that rates are at an all time low and it might be a good time to refinance. What the heck, I can at least try. The worst they are going to say is NO!
Too bad for the current bank - It looks like we will be closing on our new loan, with a new lender almost exactly a month from the date of that letter!!
It turns out, a refinance is much easier to qualify for than a new mortgage, especially if you aren't taking any extra money out. They view it as debt you already have. As long as you are paying on it as required, you are pretty much golden. The rate you will qualify is based on your credit score. I am not sure if they are loosening the requirements in that regard though, because our credit score is not all that high considering the amount of debt we have. We managed to lock in at 4.75%!
A lot of lenders have turned their backs on the 100% Loan to Value loans of the past though. If you don't have enough equity, you might have a rough time finding a lender to help. Most lenders are looking for 20% equity. Thats hard to achieve considering how much real estate has gone down in recent months and years. Do your homework and search around - there are some lenders out there that can help if you don't have that much equity anymore.
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