Three reasons why refinancing makes sense

by LaNell Long
Guest Contributor

Most homeowners refinance for the obvious reasons. Rates are low and having a lower house payment puts more money in our pockets. But if you are in your home for the long-haul, (five years or more) refinancing for a lower rate is not the only way to make use of refinancing your current mortgage. Let’s explore three typical reasons why homeowners are ready to refinance.

You can now qualify for a different loan program: Many first-time home buyers purchase their home using an FHA loan, which is designed for home buyers in the moderate credit score range. FHA loans offer lower down payments and allow a higher percentage that the seller can pay for closing costs.

The downside is, in most cases, mortgage insurance is included in your monthly payment for the life of the loan. In a conventional loan, the private mortgage insurance (PMI) will automatically be dropped when you reach 78 percent loan-to-value. Eliminating monthly mortgage insurance can save thousands of dollars over the life of a typical 30-year loan.

Additionally, for example, you may want to go from a 30-year mortgage to a 15-year mortgage, because the idea of one day living in a ‘paid for’ house appeals to you. Or you may want to build your equity faster. Depending on your credit score and income, the ability to save thousands in interest may be well within your reach.

You have equity: For long-time homeowners needing to make a major purchase, send a child to college or make home improvements, using the built-in equity makes complete sense. Homeowners can get a lower rate on a cash-out refinance than say a SoFi Parent Plus Loan which is currently offering a 7 percent fixed rate for the 2017-2018 school year.

Whatever your reason for wanting to take advantage of the equity in your home, the stability of a fixed-rate appeals to many homeowners not willing to take a chance on rates that may change without notice.

Your credit profile has improved: This goes back to being able to qualify for a different loan program, but more importantly, it’s all about getting a lower interest rate. If you were in the low-to-mid 600’s when you originated your 30-year loan and now you are in the mid-to-high 700’s, it is definitely worth checking into.

This holds true for FHA and conventional as well as VA loans. While Credit Karma is a good way to monitor your credit usage, it does not give you your mortgage scores. The best way to see your credit scores as they pertain to obtaining a mortgage is to go to It is not free, but you will see your three major scores from Equifax, Experian and TransUnion which are the scores that most lenders utilize.

These three reasons are by no means the only reasons to refinance.  But, it is worth noting that if you can at least save some money, I highly recommended that you visit with a loan officer to discuss all your options. When visiting with your loan officer, they will also explain how the process works and the documentation necessary which will set you up for a successful loan process. Good luck!

For more information on mortgages of all types in The Gayly region call LaNell Long at (405) 202-2590.

Copyright The Gayly – November 17, 2017 @ 7:10 a.m. CST.