Going for a home loan refi in Orlando, FL means hurdling some challenges to get the best deal. That is because the home refinancing market can be complex, and a person new to the industry will likely find it overwhelming. However, with the guidance of a mortgage professional, things will get a lot easier.
Here are some tips aimed at helping you become better prepared shopping for home refinancing options:
Know your home’s equity. Here’s the thing: it does not make sense to go for a home loan refi in Orlando, FL when you have “negative equity.” In other words, if your home is now worth less than it was when you started your mortgage, it defeats the purpose of refinancing. Knowing how much equity is in your home is a crucial deciding factor on whether or not to go for refinancing.
Be aware of your debt-to-income ratio. In most cases, lenders want to keep the monthly housing payments under 28% of gross monthly income – considered the threshold for borrowers’ ability to manage the monthly payments. That is when the debt-to-income ratio comes into play. How does this math work? Adding up all your monthly debt payments and dividing them by your gross monthly income determines your DTI ratio.
Make sure you have a good credit score. As credit score is one key factor for loan approval, it is no surprise when an application fails due to a not-so-good credit score. There are even instances of application disapprovals despite a healthy credit score. The consensus is that lenders typically want a credit score of 760 or higher to approve and give the lowest interest rates possible. Make sure you’ve got a healthy credit score before applying.
Understand the concept of the breakeven point. The breakeven point helps you determine if going for a refinance makes sense. It is when you figure out whether or not your monthly savings (from mortgage refinance) can cover the closing costs. For example, if refinancing costs you USD 3200, and you save USD 100 per month, it will take two years and eight months to recoup your costs. Therefore, refinancing may not make sense if you sell your home within that period.
Online looking for an expert to help you with home loan refi in Orlando, FL? Consider Homeplus Mortgage today.