Does It Pay to Re-Finance?

This is a question many homeowners may have when they are considering re-financing their home. Unfortunately the answer to this question is a rather complex one and the answer is not always the same. There are some standard situations where a homeowner might investigate the possibility of re-financing. These situations include when interest rates drop, when the homeowner’s credit score improves and when the homeowner has a significant change in their financial situation. While a re-finance may not necessarily be warranted in all of these situations, it is certainly worth at least investigating.

Drops in the Interest Rate

Drops in interest rates often send homeowners scrambling to re-finance. However the homeowner should carefully consider the rate drop before making the decision to re-finance. It is important to note that a homeowner pays closing costs each time they re-finance. These closings costs may include application fees, origination fees, appraisal fees and a variety of other costs and may add up quite quickly. Due to this fee, each homeowner should carefully evaluate their financial situation to determine whether or not the re-financing will be worthwhile. In general the closing fees should not exceed the overall savings and the amount of time the homeowner is required to retain the property to recoup these costs should not be longer than the homeowner plans to retain the property.

Credit Score Improvements

When the homeowner’s credit scores improve, considering re-financing is warranted. Lenders are in the business of making money and are more likely to offer favorable rates to those with good credit than they are to offer these rates to those with poor credit. As a result those with poor credit are likely to be offered terms such as high interest rates or adjustable rate mortgages. Homeowners who are dealing with these circumstances may investigate re-financing as their credit improves. The good thing about credit scores is mistakes and blemishes are eventually erased from the record. As a result, homeowners who make an honest effort to repair their credit by making payments in a timely fashion may find themselves in a position of improved credit in the future.

When credit scores are higher, lenders are willing to offer lower interest rates. For this reason homeowners should consider the option or re-financing when their credit score begins to show marked improvement. During this process the homeowner can determine whether or not re-financing under these conditions is worthwhile.

Changed Financial Situations

Homeowners should also consider re-financing when there is a considerable change in their financial situation. This may include a large raise as well as the loss of a job or a change in careers resulting in a considerable loss of pay. In either case, re-financing may be a viable solution. Homeowners who are making considerably more money might consider re-financing to pay off their debts earlier. Conversely, those who find themselves unable to fulfill their monthly financial obligations might turn to re-financing as a way of extending the debt which will lower the monthly payments. This may result in the homeowner paying more money in the long run because they are stretching their debt over a longer pay period but it might be necessary in times of need. In these cases a lower monthly payment may be worth paying more in the long run.

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FHA 203K Loans are insured by Federal Housing Administration. Previous to this program came to exist, you have to have a short-term mortgage for getting a house as well as yet another separate mortgage loan for home repairs.  With a FHA 203K Loan you can finance the repairs and the purchase of the home all in one mortgage loan.

If you are considering buying a home HUD-FHA now has a great program called “The HUD $100 Down Payment Incentive Program” was you can purchase a HUD foreclosed home with only a $100 down payment.  If the property needs repairs then you can use a FHA 203K loan to finance the repairs.  You can get more information on “The HUD $100 Down Payment Incentive Program” by clicking on the links at the end of this article.

The Fundamentals of FHA 203K Loan

The FHA 203K loan had been initially meant to make easier the procedure of obtaining a home that really needs repairs. To receive the dollars for repairs, you’re going to get a loan for the amount of money determined by the future appraised worth of your house. This means that the worth added to the house because of the repairs are going to be taken into consideration to estimate the existing worth. You can receive up to $35,000 financing so that you can cover the needed repair expenses.

Your preferred building contractors who’ll repair the house should be able to receive the funds in a couple draws. The initial draw covers 50 % of the job which will likely be disbursed in the beginning of the repair. And the second 50 % shall be disbursed as soon as repairs happen to be finished.

The actual repairs need to be began within thirty days after the loan have closed. The job needs to be concluded within six months. You need to ascertain a final sum to be provided to the contractors prior to loan closes. For this reason, you will need to receive the required bids from the building contractors for materials and labor charges. You are able to carry out the repairs as long as you are a licensed and bonded contractor.

Kinds of Repairs Covered by FHA 203K Loans

There are various different types of home repairs and improvement which can be covered by FHA 203K loan. Included in this are roof replacement, kitchen upgrading, plumbing related and electrical work, renovations for accessibility, house painting, and home appliance acquisitions.  Cosmetic repairs and beautifications tend to be included with the mortgage. Yet, extravagance acquisitions and enhancements will not be acceptable.

You should note that that money required to repair unattached buildings aren’t going to be included in the mortgage loan. These types of structures could include storage sheds, gazebos, and swimming pool.

How You Can Be Entitled to a FHA 203K Loan

FHA 203K loans as well as other current FHA home loans have related eligibility requirements. You’ll be able to qualify based on your credit history and earnings. Most crucial of all, the house need to be FHA approved.

Usually, the monthly payment amount of money should not exceed 41 % of your usual monthly earnings. You have to have no less than 620 credit score that is required by nearly all loan providers.

Qualified homes include FHA-approved condos, planned urban development homes, and 1-4 unit homes. You will get this financing if your home was built a minimum of one year before application.

You might enjoy wonderful benefits from FHA 203K loan. The mortgage enables you to rehabilitate your house. Additionally it is useful for renovating foreclosed houses and properties and don’t forget “The HUD $100 Down Payment Program”!

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Click The HUD $100 Down Payment Incentive for more information or you can also get more information at HUD $100 Down Payment
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How does SBA financing work?  First of all, it is very similar to regular commercial bank financing.  In fact, one of the biggest misperceptions out there is that the SBA finances transactions themselves.  This is not the case.  Loans are financed by banks and the SBA guarantees the bank in case the borrower defaults. 

So essentially, the SBA is just making a promise that they will reimburse the bank if the borrower fails.  It’s basically an insurance program for the bank.  Because of this guarantee, banks will make loans to borrowers that they would not consider, by a long shot, if they did not have the guarantee.  Aggressive features of SBA finance include 90% financing… (Most banks won’t go beyond 60% now a days), considering goodwill of businesses as collateral, financing start ups, etc. 

Because the SBA basically just guarantees the bank, borrower should remember that being declined by one bank does not mean that there transaction isn’t doable via the SBA programs.  Within SBA financing, there is a wide degree of what one bank to another will consider credit worthy.  It is also critical to remember that banks have their own problems.  You may have a solid loan request and the bank may decline it because they have exceeded their capital reserve limits or have low liquidity, etc. 

If you are declined it is best to find out exactly why, so that you can be better prepared to deal with it with the next bank, broker or lender. 

How To Apply For SBA Financing

In general you should first do phone interviews, than send in required documentations.  On the phone interview you want to discuss the overall transaction, including its strengths and weaknesses.  If there are major issues with the request you should mention them, in a positive light, and see if they might have a solution to it.  Don’t bother trying to leave anything hidden, as the underwriters will discover it later. 

Also, try to determine their level of activity, i.e. are they really funding loans?  Many banks are still taking loan requests yet aren’t funding loans.  Why?  There’s a variety of reasons, like lack of communication from upper management to loan officers, denial, trying to not lose face in the market place, etc.  But it’s your money and time that is on the line, so you need to figure this out.  One way to do this is get third party referrals from other business owners, your CPA’s, attorney or of course seasoned commercial mortgage brokers. 

Assuming you think the bank is active, and that they like your loan request you will need to get to work and provide the necessary paper work.  This is extensive and time consuming, though there is no way around it.  You fill out the forms and provide the needed documentation or you go nowhere. 

After the bank receives the package from you they normally will issue you a term sheet within 5 days or so which spells out the proposed loan.  At this point your deep into the process and need to make a decision to go with that bank or not.

SBA financing is still viable… they continue to close as the rest of the commercial mortgage market falls apart.  Business owners that need to buy commercial real estate or refinance their property should give SBA financing serious consideration. 

Jeff Rauth is President of Commercial Finance Advisors, Inc. They close SBA and other commercial real estate loans between $400,000 – $5,000,000 nationwide. Reach him at 248 885-8797 or at SBA 7a Loans or SBA Business Loan or SBA Lenders

Article Source:http://www.articlesbase.com/mortgage-articles/how-sba-financing-works-1428729.html

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