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How to refinance a home in Houston

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Have you thought about refinancing your home as rates plummeted? You may have just missed a lowest-rate window.

But there could be a chance for a great refinancing deal in the near future as lenders reassess their rates.

“A third of Houstonians who own a house could benefit from refinancing their mortgage” at a lower rate, said Richard Ellender, the regional retail mortgage manager at Amegy Bank.

Here’s how to refinance your home and what you need to know about falling interest rates.

What is refinancing?

There are two types of refinancing: rate-and-term and cash-out. Rate-and-term refinancing is getting a new loan that pays off the remaining balance of your mortgage. You might opt for this if you are:

Getting a lower interest rate, if rates drop substantially below what they were when you first got the loan.

Going from an adjustable-rate mortgage to a fixed-rate mortgage, if you want to lock in a consistent payment.

Shortening the duration of your mortgage, if you want to be on the hook over less time.

Cash-out refinances replace your existing mortgage with a larger one and hand you the cash. People who seek this type of refinancing usually use the funds to do a major home remodel, pay down other debt or deal with a financial emergency.

More Information

What is this?

I’m Gwendolyn Wu, and I’m writing “Houston How To,” a series on how to navigate the city and its complexities. Humans have an innate drive to improve themselves, and we’re always striving to live better, smarter and more efficiently by throwing countless dollars and hours at our problems. The Houston Chronicle wants to simplify that for you.

As a reporter, I usually ask the questions, but I can’t be the only one wondering how something works. What are things you need to know how to do, Houston? You can find me on Twitter at @gwendolynawu or by email at gwendolyn.wu@chron.com.

How does it work?

Like buying a house, you’ll start by shopping around with lenders for a good rate. As is with obtaining a mortgage in the first place, you have the option of going through a traditional lender or using online lenders that could provide more affordable rates faster.

Because you’ll have to go through the new mortgage process again, you’ll need documents that can prove your income, assets, credit and identity.

GET A MORTGAGE: How do I choose a mortgage lender when buying a home in Houston?

That might include, according to Wells Fargo, files on recent pay stubs, tax returns, bank statements, estimated property taxes, credit explanation letters for late payments or judgments, purchase contracts and homeowners insurance.

The faster you scrape those together, the fewer delays, Ellender said.

“Instead of prequalifying, you’re doing prework to get all your credit documents together so you can give them to your lender all at the same time,” Ellender said. “Put together, those loans fly through the system.”

Most loans will require a new property appraisal. You might be approved to skip the appraisal — the terms of how you can vary by loan.

However, you’re often better off getting a new appraisal for an accurate estimate of your property value. It may have gone up due to improvements on the home or rising home values in your neighborhood. On cash-out refinances, this is key to increasing the amount of money you’ll get. Plus, the new value keeps banks from lending you more than it’s worth.

If your application is approved, the new loan will pay off what’s left on the existing mortgage, and you’ll continue to pay your new monthly payment until it’s paid off or refinanced again.

How much will doing this cost me?

Closing costs, if you remember from when you bought your home, can be pricey. Look at how long it can take to get that money back, said Eric Fontanot, president of Patten Title Company.

“Run the numbers to make sure that the cash that you’re going to have to come out of pocket or roll back into the loan is worth the overpayment,” Fontanot said. “How long over time does it take to get money back to make financial sense?”

Consult your amortization schedule, the table outlining your scheduled payments, principal and interest, to see how much you currently pay.

Who shouldn’t refinance?

Homeowners planning to move out of their properties within the next five years won’t benefit from refinancing because their reduced payments rarely provide an equal amount of savings during that time, Fontanot said. For those hoping to do a cash-out to spruce up the house, real estate experts recommend refinancing for a home remodel only if it’s a necessary investment.

If you have bad credit, you won’t be receiving approvals or good rates, but that can be tricky if you’re already in a financial situation where you need to refinance to pay less on your home.

It’s also dangerous if the home appraisal comes in low. If your home equity is less than 20 percent of the property value, you’ll have to cough up funds for private mortgage insurance.

And keep in mind if you can afford to pay the new rate, should you do a cash-out refinance that hikes your interest rate.

I heard rates are low. What can I do?

Interest rates average, as of Thursday, 3.65 percent for a 30-year fixed rate mortgage and 3.06 percent for a 15-year fixed-rate mortgage. In recent weeks, they’ve slipped as low as 3.36 percent and 2.77 percent, respectively.

You can watch interest rates by subscribing to your local newspaper and keeping an eye on the real estate section to hear from local lenders. Freddie Mac also posts average mortgage interest rates every Thursday.

(Don’t confuse the Federal Reserve lowering rates to near-zero with mortgage rates going down, though. Those are different numbers.)

PORTFOLIO PREP: How to prepare your investments for a recession

Lenders will likely hike their interest rates again in coming weeks to maintain the flow of applications, Ellender said.

“When you’re at capacity it gets more challenging to get the loans out quicker,” he said.

How long will it take to refinance?

It usually takes 45 days to go through the entire refinancing process. You can lock in a rate any point prior to signing the final refinancing documents, but you usually can’t until the loan is approved. Rates can be locked in for 30, 60 or in some cases, 120 days.

Some lenders allow you to “float” the lock-in rate, meaning that if they fall within a certain period after approval, you get the lower rate.

Most clients like to make a loan application for a refinance and float their interest rate,” Ellender said.

But with the bump in people looking to refinance (the Mortgage Bankers Association reported that lenders received nearly six times the applications they received this time last year), times could be double that, Ellender said.

Part of the hold up will also come from delays in appraisals.

“Imagine setting an appointment in the coronavirus panic,” Ellender said. “Does an appraiser want to go in? Does the homeowner want someone new coming into the house?”

Some lenders are quoting four to six months to new applicants as they work through the slew of requests, he said. So as with a lot of other easy, quick cash scenarios…if you’re not paying money, you’re probably paying in time.

gwendolyn.wu@chron.com

Twitter: @gwendolynawu



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Evicted California renters at greater risk of getting COVID-19

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After 70 years in Monterey County, 87-year-old Mary Martinez moved in the middle of a pandemic, evicted from her modest one-bedroom, second-floor apartment at 1118 Parkside St. in north Salinas.

According to her former landlord, Martinez was evicted because she allowed a “violent man” to live with her, violating the conditions of her lease. Martinez said the man is her epileptic nephew.

Advocates say that while evictions like Martinez’s are rarer during the pandemic, landlords are feeling the financial squeeze. Some have sold rental properties to make up for lack of income. That can leave renters out in the cold when their new landlord raises the rent by hundreds of dollars or requires all renters move out before they take over the building.

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New program to help Black-owned online businesses | Technology

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ATLANTA _ Many Black entrepreneurs struggle to get bank loans and professional help to launch new businesses. A new program aims to remove those stumbling blocks.

An Atlanta nonprofit and another business have committed $150 million to the 1 Million Black Businesses effort, which will make loans and provide financial and business advice to Black-owned startups and established small businesses. Atlanta-based nonprofit Operation Hope, which helps consumers improve credit scores, is kicking in $20 million, and Shopify, the online e-commerce is adding another $130 million for the loans and website-hosting services.

Other services firms providing expertise or help include Aprio, an Atlanta-based accounting firm, and First Horizon Bank.

It’s a package of products that many Black entrepreneurs couldn’t get through a bank or credit union, said John Hope Bryant, CEO of Operation Hope.

“A bank won’t lend you money unless you can prove that you don’t need it,” Bryant said. “That’s especially true with minority-owned small businesses.”

Small businesses with Black owners were half as likely to obtain business loans as whites, according to a Federal Reserve survey published earlier this year.

The initiative is the latest effort to help Black consumers and businesses enter the financial mainstream. Earlier this month, a group that includes rapper Killer Mike opened a digital bank aimed at Black and Latino consumers.

Banks and credit unions have tried for years to help Black consumers open checking and savings accounts. The efforts helped, as the number of U.S. households without bank accounts fell to 5.4% in 2019 from 6.5% in 2017, the Federal Deposit Insurance Corp. said Monday.

Consumers who own checking and savings accounts typically have access loans with better rates and a wider variety of financial services.

The federal government’s $660 billion loan initiative for businesses hit by COVID-19, the Paycheck Protection Program, also helped few Black-owned businesses, Bryant said. PPP loans were based on a company’s number of employees and its rent obligations. many Black-owned small businesses typically didn’t have enough workers to qualify and are based out of the owner’s residence.

Bryant said a bad credit history may not prevent applicants from receiving a loan.

He hopes more companies will contribute services such as insurance advice or software typically available only to well-established businesses.

Bryant noted that 1MBB is not a charitable organization, as participating companies like Shopify will likely get a pipeline of new business customers through the program.

“This is not pure philanthropy,” he said. “Shopify believes that Black-owned businesses are good businesses if they’re properly supported.”

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This Week’s Top Car Deals & Analysis – October 30, 2020

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The final days of October offer a chance to take advantage of outstanding model year-end deals. Most offers end November 2, which means there isn’t much time left to enjoy this month’s best lease deals and deepest new car discounts. We even found incentives that can help those with bad credit buy a new or used car.

2021 car deals. Interestingly, 2021 new car incentives are showing some surprises. For example, Audi is already offering up to $12,000 in savings when leasing the 2021 e-tron all-electric crossover. We even learned that the new Genesis GV80 SUV will debut with a $589/month lease deal plus special financing rates.

Believe it or not, the 2021 Hyundai Veloster N could prove to be a great value despite a nearly $4,700 price increase compared to the previous year. That’s because our analysis finds that better incentives can make it just $10/month more expensive to lease than the 2020 model. Talk about getting more for your money.

Why are small cars bad to lease? Even though smaller cars typically come with lower price tags, that isn’t always the case when leasing. A mix of lower discounts, worse residual values, and smaller discounts can actually make a Nissan Altima cheaper than a Versa despite having an almost $10,000 difference in MSRP.

Shorter-mileage leases. More brands are offering shorter mileage allowances on car leases. Although this is typically used to offer consumers more flexibility, we’ve found cases in which you can end up getting less for your money. If you don’t read all the fine print, this could make comparison-shopping difficult.

Bad credit car deals. If you have subprime credit, you may find it harder to get financed. However, some manufacturers are offering special incentives to help make cars & trucks more affordable. For example, Chevy is offering $2,000 in down payment assistance plus 9.9% APR for 72 months on the 2020 Trax.

$0 down leases. If you’re adamant about now putting down any money on a lease, you’ll love Sign & Drive leases. In addition to requiring no money down, $0 down lease deals can cover your first month’s payment. Even hot sellers like the Honda CR-V Hybrid offer $0 down and as little as $330/month on a lease.

The high cost of safety? Even though most major automakers are offering more safety features than ever before, our analysis finds that the highest IIHS safety ratings still require costly options in 2020. That’s starting to change, but the cost of buying a car with the most bragging rights is still very high.

Disaster relief. Those affected by some of this year’s natural disasters should be aware that automakers are offering assistance. California wildfire assistance programs like Ford Employee Pricing can save thousands when replacing a car. Similarly, a 2020 hurricane relief program from GM offers $1,000 in savings.

Spooky loan situations. There are some scary scenarios you can avoid when getting a car loan. However, boosting your credit score is possible with some determination because negative items on your credit report fall off after 7 years. Our network of dealers is specially equipped to help those with bad credit.

Upcoming vehicles. Genesis finally revealed the new GV70, a small luxury crossover based on the highly-rated G70 sedan. Whether it’s a redesigned car, truck, or SUV, odds are you’ll find it on our Previews page. That said, as we reported last week, discounts ahead of a redesign can result in substantial savings.

This Month’s Cheapest Lease Deals »



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