2. At Least Twenty Percent Home Equity
Twenty percent equity means the borrower has already paid at least equal 20 percent or more of the current appraised value for the property being refinanced.
Borrowers with home equity that is below 20 percent can still apply for the low-interest refinancing arrangement by making additional payments on the loan principal. This is one way to meet the disparity between total payments made against the 20 percent equity requirement.
3. Payment of Closing Costs on the Old Mortgage Loan
Refinancing requires the payment of closing costs, which generally include the following:
(1) Application fee, (2) Loan Origination fee, (3) Discount points, (4) Appraisal fee, (5) Title Search fee, (6) Title Insurance fee, and (8) Prepayment Penalty on existing mortgage.
The first three costs depend on the lender’s current policies. It is advisable to ascertain whether the lender guarantees said costs as fixed or subject to changes during the loan processing. Request a written and guaranteed quote regarding the closing costs involved, since they can sometimes reach a hefty amount.
Based on the information furnished here, homeowners whose properties suffered from the 2009 home value decline can determine their eligibility for the government's HARP and FHA refinance assistance program.