Did you take out an adjustable-rate loan when you bought your home to take advantage of the lower rates? The introductory rate was great because it saved you money. But now that it’s adjusting, you might find that you want out and want great refinance rates.
Fortunately, refinancing from an ARM to fixed rates is simple.
There’s no right or wrong time to refinance from an ARM to a fixed-rate loan, but here are some times you may want to consider it:
The good news is that you can apply for any type of loan when refinancing from ARM to fixed rates.
If you have great credit and 20% equity, a conventional loan is a great option. You’ll get competitive rates and terms, and you won’t pay PMI. If you don’t have 20% equity but have great credit you may still qualify, just with PMI.
You also have the option to apply for an FHA or VA loan (if you’re a veteran). Both options have fixed-rate terms with competitive rates and flexible underwriting guidelines.
Just like when you bought the home, you must prove you can afford the loan. This starts with a decent credit score. For conventional loans, you’ll need a 660 or higher and FHA loans need a 580 or higher.
You’ll also need a low debt-to-income ratio. Underwriting guidelines are pretty flexible today, though, which means you could get approved with a DTI of 43% in most cases.
Finally, you should have an on-time mortgage payment history to prove you are a good borrower and can handle the fixed-rate loan especially if the payment is higher than what you pay now.
To get approved for an ARM to fixed-rate refinancing, your property must be worth enough. Today this shouldn’t be a problem with the way property values increased over the last couple of years, but it’s worth mentioning.
You’ll have to pay for another appraisal to prove there is enough collateral in the home.
If you’re thinking about refinancing out of your ARM, let Priva Mortgage help. We have many programs to help you lower your rate, get a more stable loan program, and meet your financial goals.
We’ll show you how the fixed-rate loan works and what you’ll save in the long-term by fixing your interest rate versus taking the gamble with an ARM. Again, the fixed-rate is for those who need a more predictable payment or who plan to stay in their home for the long-term.
Contact us today to learn more!
