As almost everyone is aware, the good old days of easy rate and term refinances are mostly gone. A double whammy of tighter underwriting standards and falling home values have trapped some borrowers. Two types of relatively painless options that have survived are the FHA streamline refinance and a loan modification with your existing lender. The FHA streamline is a new mortgage, while the loan modification is a modification of your existing loan to provide you with a lower interest rate. With a “loan mod” your original loan is modified, not replaced with a new loan.
The FHA streamline is for borrowers who have an FHA mortgage and does not usually require an appraisal. Other standards for qualifying are also more lenient. You do not have to use the same company who originated your FHA mortgage to do a streamline refinance. It is worth checking to see if you have an FHA mortgage.
A loan modification to refinance will require you to work with your existing lender. A modification is not just for people who are behind or having trouble making the payment. Mortgage companies are sometimes smart enough to recognize strong borrowers and offer them a great deal before they take their business elsewhere. An appraisal is generally not required. Another advantage is that if you have a second mortgage on the property it will not be disturbed by a loan modification. When talking to your existing mortgage company make sure that you are on the same page. Be sure and verify that the rate and fees are reasonable. I have some seen loan mods that were a great deal and other that were not competitive.
If your current lender will not give you a loan modification, you will be better off with a reputable mortgage banker for your refinance.
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