Many would say it would be a crazy time to buy a home or refi your home with all that is going on around us right now. However, if home buying or refinancing your mortgage has been on your mind for a while, and you have the time to explore, it may be a perfect time to do so. In honor of NeighborWorks Week, a 240+-member organization promoting affordable housing for all, and June being Homeownership Month, Penquis and MaineStream Finance provide some general tips and questions to ask as you assess whether to move forward or not on buying or ‘refi’ing’.
Should I Buy?
- Positives for buying a home:
- Home prices are slightly lower than prior to March
- Interest rates are very low
- Many folks have the time to think through the process, get to closing, and move in
- There are lots of good lending programs through MaineHousing, VA, FHA to make closing and borrowing affordable.
- Sometimes the cost of the home can actually be less than renting and you can have the home you want.
- Potential Pitfalls when buying:
- The inventory for homes for sale inventory is down. Many would-be sellers have decided to pull their home off the market and wait.
- The process can be logistically difficult for home showings, virtual closings, etc. Realtors and Banking are essential businesses and are open – closings are happening. Talk through with your realtor and lender how the process will work and what to expect in terms of how much slower it may be.
- Some of the larger banks and mortgage companies are raising credit scores and down payment requirements.
- What to do next:
- Ask how much can I afford? There are lots of good mortgage calculators out there. Compare it to what you pay for rent but remember to add in utilities, taxes, and upkeep of the new house. You don’t have to buy a home that is the maximum amount you can afford either!
- Take a Home Buyer Class online to prep you for the process– Maine HoMEworks, including Penquis, is offering online Home Buyer Education classes throughout the summer. Please visit:
- Penquis/MaineStream Finance: https://www.mainestreamfinance.org/homeownership/classes/
- Maine HoMEworks (statewide): http://www.mainehomeworks.org/classes
Should I Refi?
- Positives for refinancing your mortgage:
- Rates are historically low and cannot go much lower
- Do not generally need an appraisal
- Can lower payments with a lower interest rate and/or a longer loan period
- Lenders are generally more open to refinancing now than financing new home purchases right now.
- Things to pause on:
- If you are in deferment or forbearance with your existing mortgage, it may be more difficult to refinance, esp. with a new lender. If you are currently unemployed or furloughed, it may be difficult in general to be refinanced at all.
- Be very careful of aggressive marketing tactics to refinance through phone calls, letters in the mail, and email/texts. Look at your existing bank’s offerings first. If you go with an online lender, go to a reputable lending hub like LendingTree or BankRate.com so that you are in the driver’s seat of the process– not being pushed into something.
- Be careful of refinancing for cash out – much of the 2008 crisis was caused due to too much equity being removed by homeowners prior to the crisis.
- Make sure it is worth it – a general rule of thumb is not to refi if you are not planning on staying in the home for more than five years or only have 5 years left on your mortgage. Compare the interest rate you have now not to the quoted refi interest rate but compared to what is called the APR that includes all of the fees (or points) you must pay to refinance. Here are some refinance calculators:
June 15, 2020