Like the other home loan options in the market, going for a mortgage refinance in Houston, TX, means overcoming some hurdles to get the best deal. That is because navigating the home refinancing industry is inherently complex, and a person new to the market will likely find it overwhelming. With the guidance of a mortgage expert, things can get a lot easier. Additionally, educating yourself before your application can go a long way.
Taking the following into consideration can help you to become a better-informed mortgage refinance client:
Understanding the break-even point
The break-even point allows you to determine if refinancing your mortgage is worth it. It is when you figure out whether or not your monthly savings (from mortgage refinance) can cover the closing costs. For instance, if the total refinancing cost is USD 4800 and you save USD 100 per month, it will take four years to recoup your costs. Therefore, refinancing may not make sense if, later on, you decide to sell your home within that period.
Ensuring a better credit score
As credit score is one key factor for loan approval, an unapproved application due to a not-so-good credit score is not surprising. There are, in fact, instances of denied applications despite a healthy credit score. Lenders’ consensus is a credit score of 760 or higher to approve and give the lowest interest rates.
Calculating the debt-to-income ratio
Usually, lenders want to keep the monthly housing payments under 28% of gross monthly income, which is considered the threshold for the capacity to manage the monthly payments. The debt-to-income ratio is the equivalent of the sum of all your monthly debt payments over your gross monthly income.
Knowing the equity of your home
If you have “negative equity,” it may not make sense to go for a mortgage refinance in Houston, TX. In other words, if the value of your home is now less than it was when you started your mortgage, or worse, it is underwater, then it defeats the purpose of refinancing. Knowing how much equity is in your home is an essential deciding factor for a mortgage refinancing application.
Are you looking for a reputable mortgage company to help you with mortgage refinance in Houston, TX? Consider Homeplus Mortgage today.