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Tips for Homebuyer Loan and Refinancing

Everyone wishes to own a dream house. And while the variety of loan options available to the American consumer today from a host of banks and financial institution has made the achievement of that dream easy, the average American still grapples in the dark to find out what is the best loan suitable for him. This is because a good grasp of finance, is not a quality most possess. And even if one does posses, it is important to understand the dynamics and laws that govern homebuyer loans and refinancing.

This is why taking help and doing proper research can make all the difference. One best place to start is the internet where you don’t have to hear the convincing sales talk of a salesman, one who can sell fridge to an Eskimo.

One best place to start could be 123 fastloan that prides itself in providing high quality financial services to the American public.

The site gives helpful tips on the entire process including on high quality mortgage programs at competitive rates. This is done by taking a few particulars from the interested party. This information is then used to match it with the companies that best matches that set of requirements.

There are basically two types of people who require home loans: the first time home loan buyers and those that need refinance of their home or investment property.


The most important criteria for someone to fall under the first time home loan program is that they have not owned a house for the past three years.

These programs are especially made for people who may not have the capacity to pay full down payments or the closing costs of a mortgage. The basic idea of this program is to make the process of having a mortgage more cost effective. There are also programs that are state specific, offering a very low interest rate along with low down payments and reduced taxes.

Yet, it can become extremely difficult for a loan applicant to find out which program is suitable for him. This leads them to choose programs in which they end up paying a significant amount for down payments. This prompted the Federal government to develop two loan programs called the Federal Housing Administration (FHA) and Veteran’s Administration (VA) that have a very little down payment. There are a few parameters which determine whether someone falls in this category, most of it dependent on whether someone has taken a home loan previously or not. A home loan advisor can easily determine whether someone qualifies for it and into the acceptable program they fall under. The FHA and VA can be very useful for first time home buyers if it is combined with HFA or MCC.

MCC is Mortgage credit Certificate which is awarded by the local government agency of the state and authorizes the home loan borrower to obtain a specific federal income tax credit this credit helps free up funds for payment of monthly home loan repayment.

One can also invoke the community home buyer program into the loan. The closing cost of the loan can be gift funds, a grant, or seller assistance of up to 3% of sale price. Under this the home buyer will have to attend class on home ownership in that state. When the course is completed, the homebuyer receives a certificate which expands the qualification ratios, at the same time reducing the cash requirement.


There are those that want to refinance their home loans. There is a refinance fee which adds up quickly prompting many mortgage companies to waive off legal and refinancing application fee. This is savings all right, but this also results in a higher percentage rate for repayment. The option that allowed an owner to get the lowest percentage rate from mortgage lenders is to stay in their house for three to five years to pay points and closing costs upfront.

Refinancing costs is as much as that of a new loan due to the associated processing fees, legal fees, application fees, settlement cost etc. Refinancing also warrants an additional fee. All together this will run between three to six percent of the loan amount. Yet, there are mortgage brokers who offer low-cost refinancing and zero point loans. With these available schemes, refinancing thus ends up being a cheaper option for many home buyers.

Many lenders now offer a package for refinance where you can take the loan for more than the amount that you have left to pay back. This is called the ‘cashing out’. Thus there is a good chance that you can refinance without really increasing your monthly payments. This extra money you can then use to either pay back loans of higher interest rates, or in building an extension to your home.

It is very important to decide the interest rates that work best on your need. There is a range of interest rates at different amount points with a point equaling one percentage of the loan, and choosing the best combination can save a good amount of money.

If you are one to go for a second refinance, you need to know that there is a tax write off linked to it. Also with the rates of interest reducing, the monthly payment rates go down further.

Two rate options exist on refinancing, fixed rate mortgages (FRM) and adjustable rate mortgage (ARM). To being with you can start with ARM as it offers a very low rate for repayment, but due to the fluctuations of the financial market, these rates can go up suddenly. Thus, knowing the amount of time you plan to stay in your house you can go for ARM and then shift to FRM.

If you opt for the refinance option, you should be aware of the various taxes that govern it. E.g. the most basic thing you should know is the ruling by the Internal Revenue Service (IRS) which states that the interest of refinancing has to be deducted over the entire life of the loan. Yet if the refinanced loan goes to the renovation or development of the house, the borrower may deduct a part of it with immediate effect.

You can find invaluable help on the net. The following sites can act as a starter.

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