Posts Tagged ‘House refinance’

Letter Of Explanation (LOX) For Refinance Cash Out

How To Write Cash Out Refinance Letter Of Explanation

Letter of explanation known as LOX or LOE is a common way banks and lending institutes requests to receive financial information from their borrowers and people who are applying for loans and mortgage refinancing. If you are facing a mortgage refinancing, and you plan to do a cash-out refinancing, there are chances you will be asked by your lender to write them a letter of explanation for this cash out refinancing decision.

What Is Letter Of Explanation (LOX)

Letter of explanation is a legal document that institutes need to cover their risk management before underwriting a loan or a new mortgage. When an applicant requests a new home loan or to refinance their current mortgage, the lender needs to see and understand the ‘big-picture’ behind the figures, and numbers.

After the request has been submitted it will be reviewed by a mortgage specialists to see if it is safe to issue and fund the borrower with a new mortgage to replace their existing one. This is part of the risk management the lender must do, in order to make sure the borrower is creditworthiness is safe and sound, and the refinanced mortgage would be paid on time and in full.

Examples For Letters Of Explanations

There are plenty of financial events when the figures and numbers need further explanation, so the specialists could see the whole picture. Here are examples to general situations when a letter of explanation might be requested:

• Borrowers need to explain new inquiries in the for their credit report, too many inquiries or inquiries in the last 30 days might be because a new loan was requested (car loan for example) and the lenders needs to know that to calculate the debt to income ratio.
• Lenders would request a LOE to explain late mortgage payments, or past due payments that show on FICO credit report.
• Letter of explanation might be needed if there was a period in which the borrower was unemployed. The lender would want to understand how stable is your current job, compared to the former one.
• Letter of explanation are sometimes needed to explain personal events which effect might be seen in the financial figures and credit reports such as divorce, spouse death, illnesses etc.. In times like these, negative items might be recorded to the reports but with a simple explanation, would not stop a lender from providing a refinance mortgage to a person.

Cash Out Refinancing Explained By Letter

When it comes to refinancing there are several topics which the lender needs more explanations in order to evaluate the application and reach a decision whether to approve the refinancing. Cash out refinancing means the borrower refinances the mortgage and requests more funds on that mortgage, which will be given as cash.

For example, a home value of $350,000 and a current mortgage of $250,000, the borrower has home equity of $100,000. When applying for cash out refinancing, the person may take $290,000 mortgage, and be left with $60,000 home equity, and cash out $40,000 for any purpose they want.

Most lenders would like this cash out refinancing to be explained by letter or explanation as they have different ways to evaluate such applications.

Writing Letter Of Explanation For Cash Out Refinancing

The simple rule of thumb is always to be honest and straight forward with your lender. You will be asked to explain by letter the reason you are applying for the cash out refinancing. Here are some guidelines to help you through the writing for this explanation letter (LOX or LOE).

Rule No’ 1 – As mentioned above always tell your lender the true reason why you need the cash out solution, and not applying for a regular refinancing option. If it is a car, or home renovation, let the lender know.

Rule No’ 2 – Remember what you wrote in the mortgage application, be consistent with the initial application. If the cause has been changed, make sure you acknowledge the lender the cause for the cash out, is different from what you wrote in the mortgage application. It is better you write it, than the underwriter finds the causes are not similar..

Rule No’ 3 – If there is one reason lender will not want to see in your letter of explanation for cash out refinance, is that you need the extra cash as down payment for another loan… If it is the reason for your cash out refinancing, see rule no’ 1 – Let your lender know!

Rule No’ 4 -  When writing a letter of explanation for cash out refinancing, make sure you have a clear paper trail, to each of the issues you explain in the letter. Writing things down is not enough, add attachments as proof or evidence to your claims. Lack of complete documentation may be one of the reasons an explanation letter is requested in the first place.

Rule No’ 5 - Think WHY the lender asks for the letter of explanation. Once you can foresee what was it that disturbed the lender so much that they requested such letter, you need to write the letter covering the issue and explaining the facts that will fit into the lender’s puzzle. If you are not sure what EXACTLY needs to be explained or WHY the letter was requested, contact the lender, ask them. Once you know what is it they are seeking, you can write explanations more convincing.

Rule No’ 6 – Be professional not an amateur. The person reading the letter of explanation does not wish to read your family history, and all your personal problems. Skip the effort to squeeze some sympathy, explain your self clearly and stick to the facts and build up credibility. Remember every thing you write might be checked and cross checked by the lender, be accurate on what you write.

Cash Out Refinance – LOX

Since cash out refinancing worries the lender more than regular refinancing, as most lenders what to know their money is going for a good cause and not gambling for example… Make sure you can explain by a letter your needs and plans for the funds you are expecting to cash out from the home equity.

Write a short letter of explanation, stick to the facts, add proof and evidence to your arguments, back the letter with documentation from reliable sources, bank reports, credit statements, legal papers and such. Your letter of explanation can be a single sheet letter or a small file including all that is needed to explained.

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More Posts You May Find Interesting To Browse:

• FHA Cash-Out Refinances Becomes Tough
• How To Get 800 FICO Credit Score
• Refinance Break Even Point – What People Do NOT Know
• Front End & Back End Debt To Income Explained

Refinancing? Do Your Homework

Plan Your Mortgage Refinance Wisely

There are many reasons to refinance a home mortgage, but when the refinancing process is done in the wrong way, it may cost you a lot of money! The best advice before refinancing a home loan, is to do your homework. Check and plan all the things that needs to be taken care of, make all the refinancing calculations prior to the decision. In this short review we will try to clear out the things you need to know before you go into a refinancing procedure.

Should You Refinance Your Mortgage

This is the first question you should ask yourself, “should I refinance my home?”, there are several reasons why to refinance, as there are several reasons why not to. The main reason to refinance is to lower your existing mortgage interest rate. If your current mortgage rate is 2% higher than the best national mortgage rates, then refinancing may save you a lot of money.

Other reasons to refinance:

• You may be to lower the monthly payments by extending the new loan.
• You can choose to leave the monthly payments unchanged, but with a lower rate, the mortgage will end sooner.
• If you can afford it, you can pay higher payments each month and shorten the mortgage life span even sooner.
• You can take cash out for other needs – By refinancing a larger sum than is still left on the mortgage, you can get cash money to renovate, invest, use as downpayments, close credit debts, pay other loans or just take a trip to Hawaii.
• Change the type of interest rate from fixed rate to adjustable rate mortgage -ARM (or vise versa).
• Consolidating several mortgages on the current home into one new mortgage.

Homework You Need To Do

Your homework is not difficult, but it is not that simple. First you need to decide about your financial gaols. Where do you want to be after the refinancing ends? with lower monthly payments or with less payments due to pay? With a different type of mortgage rate or with the same? Do you plan to cash out?

If you are uncertain about which goal to choose, here are some questions to ask yourself, they will help you get a direction:

1. Which lender – Are you going to stay with your current lender? There are many advantages as the lender knows you and has all your documentations. Moving to another lender means sometimes paying more fees.
2. What are your debts – How many other debts do you have on your balance? Credit debts, car loans? student loans?
3. What is your FICO score – How high (or low) is your current credit score? A low score may mean getting higher refinancing rates, which can ruin your plans. See further below about simple credit plans that fix credit fast enough to refinance this year.
4. Do you have savings – The refinancing process is not a ’no money down’ deal, there will be points, fees, appraisal costs and other closing costs to pay. Even when some of these fees can be added to the new mortgage, some are still POC paid outside of closing.
5. Make some overall calculations – Will the lowering of the interest rate, save me more money than the fees and closing costs? How much in total will I save with the new mortgage compared to my current mortgage?

Refinance Homework At The Bank

One more step you should be doing is a very thorough ‘rate shopping’. Some people invest more time buying a Valentine gift or a Sony 3D camera than investigating about the new mortgage rates and terms. One more refinancing homework task will be to request two documents from the lending banks:

Good Faith Estimate - This document is issued by the lender and has an estimation of the fees and costs which will be included for the refinancing process. Once you ‘shop’ for the best refinance home rates, you need to have at least 3 ‘good faith estimate’ forms. This will be helpful later on when you will need to negotiate the refinance fees and costs. 

Truth in Lending Statement - This document is a mathematical calculation done by the lending bank, that states all the financial figures of the refinance program. This ‘truth in lending statement’ will show the monthly payments expected, the length of the mortgage, and the overall money you will need to be paying back over time. This is very important part of your mortgage ‘shopping trip’ as its the document that has the actual price tag of the loan.

Do Your Homework – Raise Your FICO Score

The first thing to begin with, should be the action item that usually takes the longest time to accomplish. Before going to any bank and requesting information on refinancing, you should get your credit raise in a few points! The first thing the lenders will do, once you leave their office, will be to investigate your credit score.

Even a small raise in your credit score (30-50 points) can mean lower interest rates, and thousands of dollars saving per year! Credit repair takes time, it is not an instant ‘hocus-focus’ therefore it should be planned ahead, and be the first thing in your refinancing homework to-do list.

Paying hunderds of dollars for professional attorneys services for credit repair may be a waste of money, many people buy today online credit repair plans or software, and do it themselves. It is wiser to invest $97 on a credit repair software than to stay with the current score and get 0.3% percent higher interest rate on your mortgage!

• Here is a credit repair software you can use.
• Here is a 37 Days Credit Repair Program.

What Is The Process Of Refinancing A Home Loan?

Refinancing A Home Loan Process Explained

The mortgage refinancing process is some what more simple than the first mortgage process. But still many request to know what are the stages for a mortgage refinancing process, so they know what to expect, and how to plan ahead. In this short review you can read the step by step explanation of a home loan refinancing process.

The refinancing is easier than ‘mortgage buying’, where you need to move to your new home. The refinancing process is a little bit less hectic, because nobody is moving.

First Step Is Do Your Homework

The homework in the refinancing process, is to do a small research about the money you owe on your current mortgage, the equity you may have built up (or not), the kind of mortgage rates you have (Fixed or ARM) and what are your future goals. Before you even begin the home loan refinancing process you should make sure you don’t owe more than your home is currently worth.

• First of all check how much you owe on your current mortgages.
• Second you need to check the current market value of your home.
• When you have those two parameters – Check you don’t owe more than your home is currently worth.

What are your expectations from the home loan refinancing process? These factors should be taken to consideration, as they are your financial goals. Each goal can trigger different decisions regarding the mortgage refinance process.

• Lower the monthly payments ? By lower rates or extend the mortgage life.
• Change the mortgage rates program (ARM, Fixed, Interest Only)
• Avoid Foreclosure
• Cash-out refinance – Use Refi to pay off other high-interest debts you may have.

Second Step In Refinancing Process – Go Shopping

Just like you do (or should do) when you buy a car or vacation. If you shop for cheap airline tickets worth $2000 you should shop for refinancing mortgage quotes. Sit down beside your computer or smart-phone and apply for some quotes from lenders.

This second step is important, as it will give you a ‘look & feel’ for your next mortgage deal. Send out requests, see what the lenders are willing to offer you. Use the web to search offers from lenders you have not been in touch, as well as lenders who already know you. See the difference, check which lenders send better quotes.

Third Step Refinancing Valuation

You now hold of some quotes, and you have your goal you have set for the home loan refinancing process. It is important to explain, that it might be not worthy for you to refinance. You need to compare the savings from the reduced rates to the cost of refinancing to see if it’s financially beneficial for you.

Forth Step – Lenders Will Be Checking You

There might be some differentiation here depending upon the lenders verifying key data, but at this stage, once you picked a quote the lenders will now begin to check your financial possibilities (unlike pre-approval) they will need to see documentations.

• Within three days you should receive loan disclosures, which you must sign and return to the loan consultant or lender.
• Most lenders will want to appraise the house; if the mortgage was taken long time back and the market value has changed. The appraisal fees & costs will be added to the closing costs.
• A thorough qualification check for income, assets, and FICO score credit report.
• Lenders will request a title search, to determines if there are any other liens (tax liens) on the property.

Fifth Step – Closing Refi Loose Ends

The lenders have finished to gather all the needed information and they are ready to proceed with the refinancing transaction process.

• Assigned underwriter will review the loan file with all the information gathered inside, and request any stipulations (further information/documentation) to provide a final approval.
• The finished loan documentation is created and sent to the party closing the loan. This may vary by state but in most cases it can be a title company, attorney or notary public.

The final step in the home loan refinancing process, is the 3 day rescission period. During this time you can evoke your right to rescind (cancel) your mortgage loan. After these three days, the new home loan will be finally processed and approved and you have full legal liability for paying it back as agreed.

Congratulations – Refinance Process Completed

The new lender will payoff the full remaining mortgage amount to the current mortgage company. The new title is recorded and you have finished the whole mortgage refinancing process, and will get the funds of the new home mortgage loan.

Negotiate for 2011 Refinance Rates

Negotiating Will Save You More Mortgage Money Than The Broker

Negotiate to Get the Best Home Refinance Rate

Nowadays, with interest rates still at near-historic lows, there’s never been a better time to negotiate with a mortgage lender to the get the best home refinance mortgage rate, for a fact. When one considers that just a single one-point drop in a current interest rate on a mortgage of $250,000 can save hundreds of dollars per month, it’s hard to see a reason for why not to do so.

Certainly, those folks who are sitting at 2011 with a so-called “bad credit” home loan (a sub-prime loan that’s at least 3 or 4 points above loans based off of the prime interest rate) need to be looking as soon as possible for the best home refinance rates.  If they’ve been able to prove outstanding payment history, then it’s indeed possible to pull off a bad credit home mortgage refinance.

In truth, the best home refinance rates are still possible to get from mortgage lenders even in the most credit-tightened financial climate, but it’s going to be necessary to do a little research to first find it and then to present the strongest case possible to get that rate. There are numerous Internet-based tools to find the best home refinance rate, first of all. Just use a search engine to get started.

The formal name for these 2011 loan programs – and many are being offered under the auspices of a federal program like the FHA or the USDA rural plans, set up to help homeowners get out from under onerous home loans – has to do with the best refinancing mortgage rates, by the way. That’s why it’s important to make sure any lender approaching with what appears to be a low offer on the best home refinance rate is offering the right program.

Some of those programs have very good 2011 mortgage interest rates, but are for military and VA loans only.

Once a program’s been identified, there are a number of steps a homeowner can take to make the best case possible in order to get the best home refinance rate and which complements a sterling payment history. A willingness to pay what’s called a “buy down” on the points to be offered can also help secure the best home refinance rate. Offer the equivalent of 1% of the loan value if negotiations bog down.

This doesn’t mean, of course, that one will have to “bribe” the lender to get the best negotiable refinanced rate, though, and the offer should be used only if absolutely needed. If there’s proof of quality home upkeep and improvement that can be shown, then the best mortgage rate – or at least one that’s pretty darned good – should be offered fairly quickly.

In the end, securing the best possible refinance rate is more a matter of preparation ahead of time – meaning to dazzle the lender with real proof how reliable a borrower one can be – rather than of asking the lender what it can do and then reacting to its offers. Always be proactive, and the chances of success will be high.