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The Rebound: Local loan advisor answers home refinancing questions

Homeowners rush to refinance as rates fall below 3%
Posted at 5:30 AM, May 27, 2020
and last updated 2020-05-27 09:01:37-04

As many people look for ways to save money, mortgage brokers are being flooded with questions about home refinancing.

Issac Feldman recently refinanced the mortgage on his San Luis Obispo home.

"Like everybody else, we've taken a hit and so we're definitely trying to budget," Feldman told KSBY. "That's why we're excited about this refinance because it's going to save us quite a bit of money."

After four years in his home, Feldman saw the historically low interest rates and decided it was a good time to refinance.

"Our monthly mortgage payment was going to go down dramatically so it's kind of a no-brainer," Feldman said.

Flagstaff Bank mortgage loan officer Landon Spitler helped Feldman bring down his monthly mortgage payment. He's advising all homeowners to consider the potential savings.

"An average would be somewhere between $100-500 dollars per month," Spitler said.

The total savings will depend on your principal balance and the amount of interest you would be saving.

Spitler says there are some important things to consider about doing a home refi.

APPRAISAL COSTS

One of the first steps to refinancing is having an appraisal done and that will cost you.

"Most refinances still do require an appraisal, however there's an increasing amount that will allow for an appraisal waiver," Spitler said. "An average cost of an appraisal right now might be somewhere between $500-1,000."

CREDIT INQUIRY

Keep in mind that refinancing requires a credit inquiry which may cause a temporary dip in your credit score.

"For most people, it's really nothing to worry about," said Spitler.

He says don't stress too much about your credit score when applying for a refi.

"You don't have to have great credit, you just have to have good credit."

DOWN PAYMENT/EQUITY AMOUNT TO QUALIFY

Another misconception he often hears is that you must have put 20 percent down or have 20 percent equity. Spitler says that's not true.

"You can do a refinance with as little as three percent equity."

DOCUMENTS NEEDED TO APPLY

If you're ready to move forward to refinancing, Spitler says to have your tax returns, pay stubs and bank statements ready.

WHEN & HOW TO PAY CLOSING COSTS

Another decision to make when refinancing is whether to pay the closing costs upfront or roll them into your new loan amount.

Spitler says either option is fine. The homeowner just needs to figure whether they want to keep their loan balance low by paying off closing costs right away or if they want to increase the balance by adding in closing costs and pay them off month-by-month.

INCREASED WAIT TIME

Have patience. Before the pandemic, Spitler says the refinancing process would take about a month. He's advising clients to expect to wait quite a bit longer.

"The processing times have increased along with the volume. Volume is up many times over what it would have been just a few months ago so because of that, processing times depending on the exact loan type can be between 30 and 90 days."

CONSULT WITH A PROFESSIONAL

Spitler says the mortgage industry has made many changes just since March as a result of COVID-19.

"So, I would really recommend anyone to reach out to a local mortgage professional, like us, to discuss their exact situation to determine how they can move forward."

For the Feldman family, the savings from refinancing are significant.

"We're hoping to save somewhere in the $400 a month range," Feldman said. "It's always nice to have your mortgage payment lowered."

Unfortunately, for those who have been laid off or furloughed, you will not qualify for a home refi without proof of employment.