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Mortgage loan applications on the rise

[Oct 13, 2010.]

 

The Mortgage Bankers Association reports that although purchase loan applications were down during the week of October 8, refinancing applications more than made up the difference. Homeowners are taking advantage of record low mortgage rates. Lower mortgage rates can help homeowners in several ways:

  • Reduced monthly mortgage payments: Lower mortgage payments help improve household cash flow; you can use the extra money to reduce debt or contribute to savings.
  • Faster mortgage payoff: The lower your mortgage rate, the more of your monthly payments are applied against your mortgage loan balance. Refinancing to a shorter mortgage term and a lower mortgage rate can save thousands in mortgage interest paid over the life of your mortgage loan.
  • More borrowing power: Lower mortgage rates can help with qualifying to borrow more. Cash out refinancing can provide additional funds for debt consolidation or home improvement if you have enough home equity and meet mortgage lenders' approval guidelines.

Your mortgage refinance: Tips for success

Following these suggestions before applying for mortgage refinancing can help with understanding the process, comparing mortgage refinance quotes, and finding your best refinance option.

Know your credit scores: Mortgage rates and other finance charges associated with refinancing are determined in part by your credit scores. The lower your FICO scores, the more you'll pay in financing charges and interest. In general, credit scores of 720 and above can help you qualify for competitive mortgage rates.

Deal with debt: Paying off credit card balances and other consumer accounts assists with reducing your debt to income ratio, which is calculated by dividing the total of your estimated monthly mortgage payment and minimum monthly debt payments by your gross monthly income. If your mortgage and debt payments are $1,500 per month, and your gross income is $4,500 per month, your debt to income ratio is 33 percent.

Correct errors on your credit reports: Erroneous data can lower your credit score; it's worthwhile to review your credit reports and correct any errors. Avoid dealing with third parties claiming to "erase" bad credit. This cannot be done instantly or legally, although correcting errors may help boost credit scores.

Understand the costs and benefits of refinancing: Refinancing requires taking out a new mortgage loan to pay off your existing mortgage loan, and you'll pay closing costs. Using mortgage calculators can help with determining how or if refinancing your mortgage can work for you; consulting with a financial advisor is helpful for determining the potential benefits and drawbacks of refinancing specific to your circumstances.

 

About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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