Refinance Decision Require Savings

by Brandy
(North Providence RI )

Ask Kate: Refinance Decision Require Savings My parents were trying to refinance their home. The mortgage company that they were working with told them in order to do the refinance that they needed to have $3000.00 in the bank. If they had that much money in the bank they would not have to refinance.

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Why are lenders requesting that money in the bank?

Kate Answers: Refinance Decision Require Savings

Hi Brandy, This is the million dollar question - second only to inquiring why mortgage companies lend money for home loans to people who do not need mortgages.

Short of describing mortgage banking decisions based on risk analysis, I'll just address the real issue: How can your parents refinance without having enough savings in the bank to satisfy a lender?

Most mortgage programs require a homeowner or home buyer to demonstrate a savings balance equal to two months of mortgage payments. The most popular exception for years was the subprime mortgage program which in part led our financial markets into such hot water.

FHA Mortgage Loans To The Rescue

But there are another programs, tested over time, which in general do not require much in reserve savings, FHA home loans.

Not all lenders are approved to originate FHA mortgage loans so you will need to ask your mortgage lender if they can help you with FHA.

Depending on the age of your parents, the FHA Reverse Mortgage is a secure option for Seniors.

Best wishes. My door is always open.

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P.S. Go to my Best Mortgage Rate Blog, an entertaining source of mortgage information. Subscribe now to the RSS feed.

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You can also ask Kate about your mortgage at Refinancing Advice The Nuts and Bolts.

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