Mortgage rates have recently hit record lows, and many Americans are jumping at the opportunity to buy new homes as well as refinance.
According to the Mortgage Banking Association (MBA), mortgage applications have been surging since March 2020 when the Fed slashed interest rates in response to the coronavirus pandemic. By year-end, mortgage applications are expected to double in volume compared to economists’ original 2020 predictions.
Mortgage refinancing applications are also on the rise: Currently, Americans are applying for refinancing loans at a 38% higher rate than they were this time last year.
Refinancing your house means essentially taking out a brand new loan, often for the remainder that you owe on the property (but not always). Depending on how much equity you have in the house (i.e. what you’ve paid on it already) and what your credit score is when applying, refinancing might offer you one or more benefits, including:
a lower interest rate (APR)
a lower monthly payment
a shorter payoff term
the ability to cash out your equity for other uses
When you’re faced with economic uncertainty, refinancing your mortgage can help give you some breathing room. But at the same time, if you’re struggling financially, refinancing can be a little more complicated. If you have a bad credit score, you’ll need to take a few steps to ensure you can even qualify. And when you do qualify, you want to make sure your refinanced mortgage is better than your original mortgage, not worse.
Below, CNBC Select spoke with senior community development loan officer at Quontic Bank Darrin Q. English about what to keep in mind while refinancing your home with less-than-perfect credit. He shares 3 tips to keep in mind.
Credit scores typically range from 300 to 850, and borrowers within a certain range can qualify for mortgage loans. While you don’t need a perfect 850 credit score to get the best mortgage rates, there are general credit score requirements you will need to meet in order to take out a mortgage.
Prospective home buyers should aim to have credit scores of 760 or greater to qualify for the best interest rates on mortgages.
However, the minimum credit score requirements vary based on the type of loan you take out and who insures the loan. Of our list below, conventional and jumbo loans aren’t insured by the government and often have higher credit score requirements compared to government-backed loans, like VA loans.
Having a higher credit score makes a big difference in the amount of money you pay over the course of a loan. Borrowers with scores in the higher range can save thousands of dollars in interest payments over the life of a mortgage.
A quitclaim deed is a document that is used to transfer ownership of real property from one party to another. Quitclaim deeds are also sometimes called quit claim deeds or quick claim deeds because they are a fast way to accomplish real estate transfers.
Transferring Title with a Deed
There are several ways to transfer real estate title. A warranty real estate deed transfer is the most common type of deed used when properly is sold to a third party in a typical real estate transaction.
A warranty deed promises that the person transferring the property has good title to it and the right to sell it. It includes protections for the buyer, such as compensation if there is anyone else who holds superior title to the property. This type of deed promises that there are no liens on the property such as a mortgage, tax lien, or creditor’s liens.
When a warranty deed is executed, a title search (a check of past deeds and liens for the property) is conducted to verify the seller has good title. Title insurance is usually purchased as part of the sale to protect the new owner if there is a problem. Warranty deeds are always filed with the county after they are executed.
When the number of buyers in the housing market outnumbers the number of homes for sale, it’s called a “seller’s market.” The advantage tips toward the seller as low inventory heats up the competition among those searching for a place to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to land their dream homes – unless they stand out from the crowd. Here are three reasons why pre-approval should be your first step in the homebuying process.
1. Gain a Competitive Advantage
Low inventory, like we have today, means homebuyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you’re serious about buying a home, which is always a plus in your corner.
Property investment loans are considered riskier for the lender
According to The Mortgage Reports, borrowers are more likely to let property investment loans default before their primary home loans do. For this reason, property investment mortgage rates will almost always be more expensive. In addition, interest rates for these loans are .50-75% higher than they are for primary home loans.
buying activity (demand) is up, and the number of available listings
(supply) is down. When demand outpaces supply, prices appreciate. That’s
why firms are beginning to increase their projections for home price
appreciation going forward. As an example, CoreLogic increased their 12-month projection for home values from 4.5% to 5.6% over the last few months.
In today’s market, low inventory dominates the conversation in many
areas of the country. It can often be frustrating to be a first-time
homebuyer if you aren’t prepared. Here are five tips from realtor.com’s article, “How to Find Your Dream Home—Without Losing Your Mind.”
While a recent announcement from CNBC shares that the average national FICO® score has reached an all-time high of 706, the good news for potential buyers is that you don’t need a score that high to qualify for a mortgage. Let’s unpack the credit score myth so you can to become a homeowner sooner than you may think.
With today’s low interest rates, many believe now is a great time to buy – and rightfully so! Fannie Mae recently noted that 58% of Americans surveyed say it is a good time to buy. Similarly, the Q3 2019 HOME Survey by the National Association of Realtors
said 63% of people believe now is a good time to buy a home.
Unfortunately, fear and misinformation often hold qualified and
motivated buyers back from taking the leap into homeownership.
“For the first time, the average national credit score has reached 706, according to FICO®, the developer of one of the most commonly used scores by lenders.”
This is great news, as it means Americans are improving their credit
scores and building toward a stronger financial future, especially after
the market tumbled during the previous decade. With today’s strong
economy and increasing wages, many Americans have had the opportunity to
improve their credit over the past few years, driving this national
Taking out a mortgage can be an exciting time, especially for first-time homebuyers. However, all the steps involved can also make the process time-consuming. If you’re in the market for a home loan, it’s likely you’ve heard the terms “prequalification” and “preapproval” tossed around in conversation, on the web, or in advertisements from lenders.
While these two concepts are related, they refer to entirely different stages within the mortgage process. Yet many borrowers may think both words mean the same thing, especially if they haven’t encountered such terms before. It’s important to understand exactly what each refers to, as both are a way to streamline the steps it takes to get a mortgage. Here’s a primer on mortgage prequalification vs. preapproval to ensure your homebuying process is a smooth as possible.