California Mortgage Refinance
Rates started dropping in early-2019 and were held very low throughout the year. According to forecasts low rates for home loans are expected to continue through 2020. So, if you have a mortgage from 2018 or before, you might have a good opportunity to refinance.
Refinancing a mortgage is the replacement of an existing mortgage loan with another under different terms. You may consider refinancing to take advantage of a better interest rate to get a reduced monthly payment or a reduced term, to consolidate other debts into one loan, to reduce or alter risk by switching from a variable-rate to a fixed-rate loan, for example, or to free up cash. Your refinance can be handled between two separate banks, or by getting a new mortgage loan with the same lender.
Refinancing has both pros and cons depending on individual situations. Potential benefits include saving money by refinancing into a loan with an interest rate that is lower than your existing rate, getting lower required monthly payments, shortened loan term, consolidating debts into one single loan (preferably with a lower interest rate) so that it is easier to keep track of payments and loans, changing your loan type or paying off a loan that’s due.
The disadvantages of refinancing include transaction costs like closing costs, more interest on your debt when you stretch out loan payments over an extended period, or lost benefits of your previous loan.
Government-Backed Refinancing Options For Eligible Homeowners
FHA Streamline Refinance -The FHA Streamline Refinance program allows borrowers to refinance an existing FHA loan to a lower rate more quickly. This option saves borrowers time and money as it avoids a lot of paperwork, often without an appraisal. It's available as a fixed rate or adjustable mortgage; it comes as a 15- or 30-year term; and there's no FHA prepayment penalty to worry about.
The mortgage to be refinanced is required to be FHA insured and current (not delinquent), the refinance must result in a net tangible benefit to the borrower, cash in excess of $500 may not be taken out on mortgages refinanced using the streamline refinance process. Homeowners using the Streamline Refinance program must have a perfect payment history stretching back 3 months. 30-day, 60-day, and 90-day lates are not allowed. One mortgage late payment is allowed in the last 12 months. 210-Day "Waiting Period" between loan start dates applies.
FHA Streamline Refinance program providers in California
FHA Cash-out Refinance - The FHA cash-out refinance option allows homeowners to pay off their existing mortgage and create a larger home loan that provides them with extra cash. The amount of money that can be borrowed depends on the amount of equity that's been built up in the home's value.
FHA cash-out refinance requirements are:
620 credit score or higher (varies by lender)
Must be an owner-occupied property
Loan-to-value (LTV) ratio must to exceed 80 percent
No more than one late payment in past 12 months
Existing mortgage must be at least six months old
Debt-to-income (DTI) ratio below 41 percent
Non-occupant co-borrowers may not be added
FHA Cash-out refinance program providers in California
VA Streamline Refinance -VA Streamline Refinance (also known as “VA to VA” loan or Interest Rate Reduction Refinancing Loan (IRRRL)), allows veterans who are refinancing a VA mortgage to refinance their current mortgage interest rate to a lower rate than they are currently paying (or to refinance from an adjustable-rate mortgage into a fixed-rate one).
No appraisal, income or employment verifications, a credit report or termite report are required, as long as the current mortgage has been paid as agreed for the last 12 months and is up to date at the time of refinancing. VA is allowed to include up to $6,000 in their refinancing loan for the purpose of energy efficient home improvements. The VA has a funding fee of one-half of one percent of the loan amount which may be paid in cash or included in the loan. They cannot receive any cash back.
VA Streamline Refinance program providers in California
VA Cash-Out Refinance - The VA's Cash-Out refinance loan gives qualified veterans the opportunity to take cash out of their home equity or refinance a non-VA loan into a VA-backed loan.
Eligible borrowers must:
qualify for a VA-backed home loan Certificate of Eligibility, and
meet VA’s—and the lender’s—standards for credit, income, and any other requirements, and
live in the home they’re refinancing with the loan
VA Cash-Out Refinance program providers in California
USDA Streamline Refinance - Since 2012 the USDA streamline refinance has allowed eligible homeowners current on their USDA loan for the previous 12 months to refinance without a new appraisal and even add or remove borrowers from the note.
The mortgage to be refinanced must:
already be a USDA loan (Guaranteed or Direct).
be current for the 180 days prior to the refinance request.
The existing loan must have closed 12 months prior to the USDA refinance request.
The homebuyer must meet the USDA’s debt-to-income ratio and credit requirements.
The maximum loan amount must not exceed the original loan amount at the time of purchase.
Those interested in USDA streamline refinancing should know that cash cannot be taken out of a USDA streamline refinance. However, those refinancing may roll the guarantee fee into the final loan amount.
USDA Streamline Refinance and program providers in California
USDA Streamline-Assist Refinance - this program does not require a new appraisal, credit checks or calculations of debt-to-income ratios that’s why it is often seen as the most favorable USDA refinance option. Additionally, borrowers with little or no equity in their home may apply.
Requirements for this refinance program are similar to that of the streamline, with a few additional details that include:
The refinance must result in a $50 or greater reduction in the borrower’s monthly payment.
The existing loan must be current for the 12 months prior to the refinance request.
Those refinancing a USDA direct loan will require a new appraisal.
Borrowers may be added to the note, but not removed.
USDA Streamline-Assist Refinance providers in California
Non-Streamline Refinance - The USDA’s non-streamline refi requires borrowers to get a new appraisal. Potential borrowers may do so to avoid the $50 payment reduction requirement for the streamline-assist or to receive an updated appraisal on their home.
The requirements are similar to those of the USDA streamline.
USDA Non-Streamline Refinance providers in California
Backed by Fannie Mae or Freddie Mac, a conventional refinance often allows those with an FHA loan to eliminate the Mortgage Insurance Premium.
Freddie Mac’s Enhanced Relief Refinance provides refinance opportunities for homeowners with existing Freddie Mac mortgages who are making their mortgage payments on time but whose loan-to-value (LTV) ratio for a new mortgage exceeds the maximum allowed for standard refinance products.
You can be eligible for this program if Freddie Mac owns your loan, the note date of your loan being refinanced is on or after October 1, 2017, you are current with your payments with no 30-day delinquencies in the most recent 6 months and no more than one 30-day delinquency in the past 12 months, and your mortgage being refinanced has not been previously refinanced through HARP.
Borrowers who have Fannie Mae mortgages and are making their mortgage payments on time but whose LTV ratio for a new mortgage exceeds the maximum allowed for standard limited cash-out refinance transactions can consider the high LTV refinance option.