May 7th, 2022 3:59 PM by Jackie A. Graves
Mortgage rates hit a 13-year high this week, but we’ll look away from that dreary news and instead look to some ways to navigate today’s housing market. Refinancing is a tempting option for homeowners who want to save money or pay off their mortgage faster, but you’ll want to carefully consider the pros and cons, including the impact of refinancing on your credit. In other news, learn more about VA loans and the mortgage prequalification process.
Refinancing your mortgage
Refinancing can support financial goals including saving money and paying off your mortgage faster. However, unless you’re looking to do a cash-out, now is not generally a good time to refinance due to rising rates. If you’re still considering a refinance, take into account factors such as the amount of time you plan to live in the home and the cost to obtain the new mortgage.
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Refinancing and credit
A mortgage refinance can impact your credit score in a number of ways. For example, you may run the risk of missing payments when transitioning between loans or significantly increase your debt load, all of which can hurt your credit. Learn the steps you can take to minimize the impact of a refinance on your credit, such as avoiding big purchases.
Prequalifying for a mortgage
Prequalification can be an important step in the process of obtaining financing for a home. You’ll provide to a lender basic information including how much you earn, how much you want to borrow and how much you want to put down. The process will help you to get a sense of how much you can afford.
VA cash-out refinances
If you have a VA loan, you can tap up to 100 percent of your home’s equity in a cash-out refinance. You’ll want to use the money to support long-lasting projects, such as home improvements, rather than short-term ventures like a cruise. While it may be tempting to use a refinance to pay down or consolidate debt, doing so will deplete your home equity cushion, so think carefully about this option.
VA loan closing costs
While VA loans have lower credit score minimums and no down payment requirements, they still come with significant closing costs. Origination fees, funding fees, discount points and more typically add up to about 3 percent to 5 percent of your loan, and you can choose to pay upfront or roll those costs into your loan balance.
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