How
do I know if it makes sense for me to refinance?
First determine your financial mortgage related goals: i.e.
are you looking to improve your monthly cash flow, reduce
your mortgage term, or do you need cash? Obtaining the right mortgage for
your particular needs could make sense even when rates are
not at their lowest levels. First identify your goal and contact
a Paragon Mortgage Bank for suggestions on mortgage programs
that would best help you meet your objectives. |
What
is the difference between a conforming and a non-conforming
(a.k.a. jumbo) mortgage?
A conforming mortgage is one that does not exceed the maximum
mortgage limit of the two primary GSE's (Government Sponsored
Enterprises), Fannie Mae and Freddie Mac. The current conforming
maximums are: $417,000 for a 1 unit property, $533,000 for a
2 unit property, $645,300 for a 3 unit property and $801,950
for a 4 unit property. These maximums apply to all states except
Alaska and Hawaii. Therefore a jumbo mortgage is one that has
a mortgage amount exceeding these limits. The interest
rates on jumbo mortgages are typically between 1/4 - 5/8% higher
than on conforming mortgages.
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What
is a super jumbo mortgage and how much higher (than the average
jumbo mortgage) is the interest rate typically?
A super jumbo mortgage is a mortgage request for a single
family home exceeding $650,000.
A super jumbo mortgage typically has a rate 1/4% higher than
your average jumbo mortgage. |
When
refinancing investment or rental property, what is the difference
in rate for non-owner occupied vs. owner occupied financing?
Conforming non-owner occupied rates are typically 3/8% higher
than owner occupied interest rates. The equity requirement is
usually higher for non-owner occupied mortgages as well, typically
at least 20-30%. |
How
much Homeowner's insurance coverage will I need to close the
new mortgage?
A safe bet is to buy a guaranteed-replacement-cost policy that
will generally pay out 20-50% more than the face value of the
policy to rebuild your home (this is also the preferred policy
of lenders). A replacement-cost policy typically adjusts the
amount of insurance each year to keep pace with rising construction
costs in your area. It is important to note that local building
codes require structures to be built to specific standards which
could vary over time, if your home is severely damaged, you
may be required to rebuild it to current codes. Even guaranteed-replacement-cost
polices do not always cover this expense. However, many insurers
offer an endorsement that will pay for the upgrading cost, it
is a good idea to consider adding such an endorsement to your
replacement-cost policy. |
Will
I need to get flood insurance coverage to close the new mortgage?
The lender should not ask you to obtain a flood policy unless
your property is located in a flood hazard zone. |
Will
the lender require a fee to lock in my interest rate?
For a traditional 30-90 day rate lock, the lender will not require
the borrower to pay a lock fee, but for the privilege of locking
for a period beyond 90 days they may. Some lenders allow borrowers
to lock and then float the rate down one time during the mortgage
process, typically a borrower is required to bring in a fee
of ½-1% of the mortgage amount which is then credited
(or refunded) to them at closing. It is a lock fee the lender
requires to insure the transaction will in fact close.
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What
is a mortgage prepayment penalty and is it generally advisable
to get a mortgage that has one?
A prepayment penalty on a mortgage allows the lender to charge
a borrower additional interest when a mortgage is repaid
during the penalty period, which is usually somewhere in the
first three to five years of the mortgage. If a mortgage does
have a prepayment penalty, this is clearly stated within the
mortgage disclosures, mortgage note or prepayment penalty rider
to the note. The advantage of taking a mortgage with a
prepayment penalty is that it could carry a lower rate of
interest. |
