Some of my clients are wondering if they should refinance or wait. The main reason is their home value. This is a big question when it comes to refinances. If you have a mortgage that is eligible for a HARP refinance, it's not as big a question but if not – what to do?
To find out if your mortgage is eligible for a HARP loan, you can go to www.fanniemae.com or www.freddiemac.com and look up your property address. It will tell you if you are eligible. If so, that will allow you to refinance without the pressure of worrying about the property value – to a certain degree. If you currently do not pay mortgage insurance, this will allow you to refi with an appraisal value over 80% and still not need to pay MI. If your value is really upside down and you are over 100%, you still won't have to pay MI, but it may be more difficult to get the refinance done due to lender overlays.
What happens if you are not eligible for a HARP loan? Should you refi now or wait? That really depends on your own situation. There may be reasons to wait. Here are some of the things you need to consider:
-home values – if you are close to 80% loan to value, you may want to see if you can get an idea of what your property will appraise for. There are different sites that will give you an idea from zillow to your own tax value. The ultimate value will depend on what the appraiser comes up with. You may need to pay for an appraisal realizing that you may not be able to refinance – but you won't know until that appraisal comes back. Home values seem to be rising, so it may help to wait a few months if you are close to the value you need.
-employment – if you or your spouse change employment, it may affect your ability to qualify. If you are in the same line of work, it may not matter. If you change from a w-2 employee to self employed, you will probably have to wait 2 year to be able to use that income. If you know you are changing jobs, you may want to refinance prior to the job change.
-loan program changes – this can affect you and you may not know it! There are constantly program changes that can affect whether you can qualify for a new loan. Your credit score may affect your ability to refinance. Some programs are limited to certain scores and if you need to raise your score, you may need to wait. The hard part of this is that we sometimes do not know about changes until they happen and that may affect you.
-interest rates – this is a big one! Interest rates can change daily and sometimes more than once a day. Because of that, your refinance may make sense today but if rates go up next week and you are not locked into a rate, it may not make sense next week!! Because of economic news, we are seeing rates fluctuate daily. If you wait too long, you may see interest rates rise enough that it doesn't make sense to refinance.
If you aren't sure what you should do, talk to your loan officer or give me a call. It's worth the time to make sure you make an informed decision. We never know when rates have hit the bottom until they go up, so if it makes sense to refinance now, call and start the process with your loan officer.