If you are looking into refinancing your home in order to look for better offers and hopefully save up some funds for home improvement, then now would be the best time to do so. Recent reports show that lending guidelines were changed in favor of homeowners.
Before we start off getting down to the good news about the new refinancing guidelines, it would be best to get a better understanding of the meaning of the word "refinance." According to Investopedia, refinance means "replacing an older loan with a new loan offering better terms."
Now that we have laid out the meaning of the word, let us see how these new refinancing guidelines could work in the homeowners' favor. According to Realtor.com, the new guidelines allow for lower loan adjustments and competitive pricing.
Back in 2015, those who attempted to cash-out refinance their homes would have been given higher rates with a 70 percent loan-to-value ratio limit. However, the recently revised guidelines can now go as far as a 75 percent loan-to-value ratio.
The publication further offered an example to help homeowners get a clearer picture of this revision. At the end of 2015, a rate and term loan would have received a 4 percent interest rate on a 30-year mortgage with a fixed rate. Those who opted for a cash-out refinance would have cost 4.625 percent, which is definitely not working for the homeowners' favor.
The new guidelines, however, allow for lower loan adjustments for 75 and 80 percent loan-to-value ratios. As for the case of jumbo home loans, the publication noted that these revised guidelines will allow them to get a cash-out refinance for up to 70 percent loan to value, as long as their minimum credit score is 700.
These guidelines would, of course, depend on the state you are in and the maximum high-balance loan limit in your area.