First Time Homebuyer Information & Education
Are purchase loans different than refinancing
Are purchase loans different than refinancing - Although all real estate loans are financed along the same guidelines there are some differences in purchase money loans and refinance loans.
A refinance loan allows you to take cash out and has a three day right of rescission. Purchase loans do not have either of these features.
The Purchase money mortgage process is more cumbersome than getting a refinance because of the time constraints involved.
With a refinance loan you may take cash out, if you have the equity available, lenders won't allow cash out on a purchase.
When a homeowner is looking to do a refinance transaction, the lender is required to make sure that the loan has a "net tangible benefit" to the borrower.
Many lenders will place purchase transaction loan files ahead of refinances in their underwriting departments. This is because purchases are often much more time sensitive and frequently must ahere to a specific closing date. In a refinance transaction, although the borrower often feels time constraints, closing the loan a few days late usually does not present any hardships.
Refinancing today has become an incredibly fast and easy process compared to the first time you purchased a home.
Many times a person can purchase a home with one loan program with the direct intent to refinance after a handful of months. Several factors can play into such a scenario, such as a flow of income to be provided after the purchase, or credit repairs, or the value of the home raising quickly, etc...However, most companies require that the initial mortgage be 'seasoned' for a set amount of months before a new refinance is allowed.
In most cases, a refinance to replace the current mortgage with one with a shorter term or a lower interest rate has the same underwriting requirements as a purchase loan. For instance, refinancing a current 30 year mortgage with a 15 year mortgage is often treated the same a purchase money mortgage. On the other hand, a Cash-Out refinance in which the home owner withdraws from the equity built in the house has somewhat stricter qualification threshold.
No new deed is required for a refinance unless one of the current owners is being taken off of the property. Many other costs associated with a purchase money transaction such as a home inspection and survey may not be required.
A "contract" is involved in a purchase loan which is not involved in a refinance.
Some lenders will offer enhancements to the interest rate for new home purchases and higher down payments.
Ironically some lenders will create a purchase as a refi, if you are in a lease option and have 12 months cancelled checks, you can potentially "refinance" the property based on appraised value and get a lower loan to value.
One of the biggest differences is there maybe loan to value reduction if you are planning to take money out on a refinance.
When you refinance their is a 3 day right of rescission period. Where as on a purchase, the transaction will fund that day.
How will a realtor help me with a home purchase - When you are ready to buy a home there are many steps you need to take, the first taken by most people is to find a good realtor. The realtor will do many tasks for you to make the home buying process run smooth and fast!
The realtor will be the one to show you each house. They will try to show you a wide range of houses, within your price range in any given neighborhood. You should tell your realtor, exactly what you are looking for in a home, as well as a general area that you would like to live.
A realtor will be able to assist you with a home purchase by being able to utilize MLS records of almost all homes that are being sold in the area(s) you are looking for. You can tell your realtor exactly what you are looking for, number of bedrooms, bathrooms, basement or not, square footage, etc... and they can easily pull this information up for you very quickly. A realtor will also set up appointments for you to go see the homes that you are most interested in which will save you lots of time and effort.
A Realtor has access to most of the same data used by appraisers. Real Estate Agents can use these records to research sales trends and market values. A good Realtor can help insure that you don't over pay for your home or possibly reccomend a home being offered under market value.
As a buyer, you may wish to engage the services of a Buyers Agent. The buyers agent works for you, the buyer. Traditional realtors work for the seller and must always work to the benefit of the seller rather than to yours.
If you are buying a home you will not pay any fees directly to the real estate agent, they earn their commissions from the seller's side of the transaction. As a buyer there is really no reason not to work with a real estate agent, and have them represent your interests through out the process.
Since a Realtor is a professional they will be much more knowledgable on how to find you a home. They should be familiar with the area and have a large base of realtors they work with. This makes finding a home easier then doing it alone. As the buyer its the seller paying the fee for your realtor.
Information listed above is to be used for educational purposes only and is not guaranteed
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