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Rates are effective 10/09/2024 and are subject to change without notice. APR shown is provided by a partner of ConsumerAffairs.
| Product | APR | |
|---|---|---|
| 6.922% 0.00% | Get Rates | |
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The APR shown of 6.922% is available for a 30-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. |
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| 6.658% -0.21% | Get Rates | |
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The APR shown of 6.658% is available for a 20-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. |
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| 5.826% 0.02% | Get Rates | |
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The APR shown of 5.826% is available for a 30-year VA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. |
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| 5.994% 0.00% | Get Rates | |
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The APR shown of 5.994% is available for a 10-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%. |
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A mortgage is a loan that's used to buy real estate — typically residential property. According to the Consumer Financial Protection Bureau, it's an “agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you've borrowed plus interest.” In other words, it's the legal document you have to sign to finance a house.
Of all the different types of mortgage loans, conventional and government-backed mortgages are most frequently used to finance a home.
A mortgage functions as a lien or legal claim against a property (a single-family house, condo, duplex, etc). In exchange for immediate funds, the borrower must repay the loan with interest and fees over time.
Conventional mortgages require a minimum 620 credit score.
The term refers to the life span of the loan, which is usually between 15 and 30 years. There are also 10-year term options. The mortgage rate refers to the amount of interest the lender charges in exchange for the loan.
Mortgage rates can be fixed or adjustable. A fixed-rate mortgage has the same interest rate for the entire loan term, whereas an adjustable-rate mortgage increases or decreases based on a changing index.
“Mortgage amortization” is the process of paying down home loan debt over time. Homeowners build equity by making payments on their mortgage principal. If you get a second mortgage, you borrow funds with your house as collateral for the loan but don't have to use the funds to purchase a home. Home equity loans and lines of credit are types of second mortgages.
Mortgage refinancing companies replace your existing mortgage with a new loan. The two most common types of home refinance loans are rate-and-term refinancing and cash-out refinancing.
Many homeowners refinance their mortgage to lower their monthly payments, get a better rate, convert home equity into cash or pay off their loan faster.
For example, the home equity conversion mortgage (HECM) is a reverse mortgage backed by the federal government. This program lets you draw on your home's equity to borrow money.
Loan officers work for financial institutions and handle the lending process. On the other hand, brokers negotiate with lenders on your behalf to find a loan program with the best terms for you.
The average mortgage is $840 to $1,200 per month. Most financial experts suggest keeping your mortgage payment below 30% of your monthly gross income (and your total debt-to-income ratio lower than 36%).
Keep in mind that the total cost of a mortgage is more than just the price of your house. As you compare mortgage companies, consider closing costs, mortgage points and prepayment penalties.
Once you've covered all the upfront costs of a home loan, your monthly mortgage payments include principal, interest, taxes and insurance (PITI). In some cases, other regular expenses include homeowners association or condo fees.
These days, you can complete almost the whole mortgage process online. After you've checked your credit score, figured out how much house you can afford and researched the best mortgage lenders, it's time for some paperwork.
Keep in mind that the mortgage lender makes a hard inquiry on your credit when you apply. Hard inquiries cause your credit score to take a small dip, so only try to get preapproved when you're serious about putting in an offer on a home.
The ConsumerAffairs score provides a balanced assessment of mortgage lender's customer satisfaction and capability. Customer satisfaction is based on customer reviews and star ratings found on ConsumerAffairs. Lender capability is evaluated through state coverage, number of licensed mortgage loan officers, and total value of loan originations in the previous year. We regularly review and update this methodology to ensure accuracy and relevance.
There are two main types of refinancing: rate-and-term refinancing and cash-out refinancing.
Rate-and-term refinancing involves replacing your existing mortgage with a new one that has a lower rate, a different term or both. Some reasons to get a rate-and-term refinancing loan include:
Cash-out refinancing involves replacing your existing mortgage with a new mortgage that has a higher principal balance and taking the difference in cash. You pay off your old mortgage with the new loan, and any excess is yours to use for any purpose. People obtain cash-out refinances to perform home improvements, pay for school and carry out investment goals.
Cash-out refinancing loans may or may not come with a lower interest rate, but this is secondary to the main benefit of converting some of your equity into cash.
The application process for a mortgage refinance is similar to that of your original mortgage. You’ll need proof of income, employment and assets. Additionally, you’ll need to provide homeowners insurance information and your HOA representative’s name and contact information (if applicable). Streamlined refinancing programs, which require less documentation, are available for FHA, VA and USDA loans.
On average, it takes most people between 30 and 45 days to refinance a house. However, there can be unexpected delays related to inspections, appraisals and other parts of the process. It’s not uncommon for it to take up to two months or longer in some situations.
These days, refinancing is easier than ever — you can practically do it all online if you want. You can help speed up the process by having all your documents in order and in one place. Many reports against refinance lenders describe situations where paperwork was lost or information wasn’t where it was supposed to be.
Refinancing makes the most sense when you want to pay your home loan off quicker, when you have enough equity built up to refinance without mortgage insurance or when you need access to funds. Usually, it makes more sense to refinance when you plan to stay in the house for a while. It also depends on how soon you can refinance a mortgage.
The cost to refinance a mortgage depends on several factors, including the size of the loan, your location, your financial history and your existing home equity. Generally, it costs between 2% and 6% of the total loan balance. For example, for a $150,000 mortgage refinance, expect to pay between $3,000 and $9,000 at closing. You can pay closing costs out of pocket or roll them into the loan.
Many of the fees associated with refinancing will sound familiar from your first home loan, such as closing costs. The following fees are standard among most refinance lenders:
Specific refinancing requirements vary depending on the loan type (conventional, VA, FHA, etc.) and the lender through which you obtain it. That said, here are a few basic requirements to expect:
You could refinance with your current mortgage lender, but you don’t have to. Your existing lender might reduce or waive some of the fees associated with refinancing. This is a common strategy to keep business. Still, it makes sense to shop around. According to the Federal Reserve Board, a difference of even half a percentage point in your interest rate can add up to thousands of dollars over the lifetime of a home loan.
Refinancing with your first mortgage lender can sometimes be easier. For instance, the company already has much of your information on file. At the same time, switching your mortgage over to another financial institution could be worth the hassle if it saves you money in the long term.
Like any big financial decision, refinancing a mortgage can seem like a complicated process. Refinancing is popular because it’s so versatile — you can use it to get cash out, lower payments, remove private mortgage insurance and more. Let your financial goal inform where you start looking for a lender. Keep in mind, too, that a mortgage broker can help you compare lenders if you want to save time.
Here are some tips for choosing the right refinance lender:
The ConsumerAffairs score provides a balanced assessment of mortgage lender's customer satisfaction and capability. Customer satisfaction is based on customer reviews and star ratings found on ConsumerAffairs. Lender capability is evaluated through state coverage, number of licensed mortgage loan officers, and total value of loan originations in the previous year. We regularly review and update this methodology to ensure accuracy and relevance.
A home equity loan is a secondary mortgage product that taps into your home's equity. This product is ideal for homeowners whose homes have appreciated but don't want to refinance their existing mortgage to pull cash out of their homes.
Home equity loan funds are disbursed in a lump sum. For the duration of the loan, you'll make monthly payments according to a predetermined repayment schedule. In most cases, a home equity loan offers a fixed interest rate so that you are not affected by rising interest rates.
Homeowners commonly use home equity loans to make home improvements, make big purchases or set aside emergency cash.
An alternative use of a home equity loan is to avoid private mortgage insurance (PMI) when buying a home with a small down payment. Homebuyers who don't have a 20% down payment for a conventional loan typically must pay PMI to protect the lender. Some lenders allow borrowers to use a home equity loan to piggyback their down payment so it reaches the 20% necessary to avoid PMI.
Additionally, your lender may charge fees for your loan. These are the most common fees that you'll encounter. Some lenders may waive these fees, so keep this in mind when you're comparing loan options.
Some lenders offer discounts on your interest rate if you set up automatic monthly payments. Additionally, lenders may offer relationship-based pricing to lower your interest rate or fees.
Compare multiple home equity loan lenders to find loan options with the most attractive rates and terms. Once you've found your lender, apply for your loan in person, over the phone or online.
Applications vary by lender, but as a rule, you need to provide your personal information, your property address and details, how much you want to borrow, and information about your income, assets, liabilities and monthly expenses. The lender might also ask how you plan to use the loan funds.
After completing your application, a loan officer will request documentation to support your application. These documents can include your most recent paycheck stubs, W-2s, tax returns, mortgage statements, property tax statements and homeowners insurance policy.
Depending on the lender, an appraisal may be required. An independent appraiser determines your home's value based on its features and recent sales of comparable homes in your local area.
While not as accurate, homeowners can get an estimate of their home's value through websites or apps like Zillow and Redfin or by speaking with a local real estate agent.
When the lender completes its underwriting, it will make a decision on your application. If approved, you'll receive a lump sum distribution to your bank account or a check. You'll start receiving monthly statements with loan details, including your minimum monthly payment and due date.
While a home equity loan is a good choice for many homeowners, it isn't the best fit for everyone. If a homeowner wants to use their equity, they can also take out a home equity line of credit, a cash-out refi, or a reverse mortgage (for seniors). Plus, there are other options available that do not put your home at risk in case you cannot make payments.
A home equity line of credit is a revolving line of credit secured by your home. You'll receive a maximum credit limit based on your equity, your credit history, the lender’s maximum LTV ratio and other factors.
Draws can be made against your HELOC up to your credit limit during the draw period. Monthly payments for HELOCs are generally interest-only during the draw period, which is often 10 years. The interest rate is variable and based on a benchmark index.
After the draw period is over, the repayment period begins, during which you make regular monthly payments of both principal and interest. The repayment period is often 20 years.
Instead of adding a second mortgage to your home, many borrowers refinance their existing into a new loan with a higher balance than they currently owe, taking the difference in cash. Lenders normally require borrowers to have at least 20% equity in their home, and the LTV ratio maxes out at 80%.
Keep in mind that a cash-out refinance will have closing costs similar to your original mortgage, and you will be restarting your loan term (though you may choose to refinance into a shorter-term loan).
A reverse mortgage is a loan for older homeowners who want to withdraw cash from their home but don't want a monthly payment. The loan doesn’t have to be paid back until the borrower dies or moves out of the home. To qualify for a reverse mortgage, homeowners typically have to be at least 62 years old and have significant equity in their homes.
For a smaller loan amount, a 0% introductory annual percentage rate (APR) from a credit card may be a better choice. It is an unsecured loan, so your home is not at risk. And some of the best 0% APR credit cards offer no-interest financing for almost two years.
However, if you do not pay off the balance before the intro period expires, the unpaid balance reverts to the standard interest rate, which can be much higher than a home equity loan or mortgage.
The ConsumerAffairs score provides a balanced assessment of mortgage lender's customer satisfaction and capability. Customer satisfaction is based on customer reviews and star ratings found on ConsumerAffairs. Lender capability is evaluated through state coverage, number of licensed mortgage loan officers, and total value of loan originations in the previous year. We regularly review and update this methodology to ensure accuracy and relevance.
Ashburn
VA
Virginia