Should you consider financing closing costs, escrow reserves, or other cash needed at closing?

If you've built up some equity in your home, when you refinance, you may be able to "cash out" some of that equity to pay off credit cards or other revolving debt, improve your home, help pay for college, or other financially sound investments. The same is true of refinancing costs: If you have enough equity in your home, you may be able to roll some of the cash due at closing into your loan.

Some of the "cash needed to close" as it's sometimes called includes settlement costs and fees, prepaid interest, escrow reserves, state or local government charges, or funds needed to pay off your existing mortgage. Some or all of those costs can sometimes be financed as part of your new mortgage loan.

But you have to be careful. It's not always the case that you can borrow up to 100 percent of your home's value. Many loan programs are based on what's called a "loan-to-value" ratio. You may qualify for a advantageous refinanced mortgage if you borrow no more than 80 percent of your home's value, but may not qualify for the same terms if you borrow 90 percent. We can help you qualify for refinance loan programs for as much as 95 percent of your home's value in most cases, but the lower your loan-to-value ratio (that is, the less you borrow), the better terms you'll generally receive.

Call us before you sign the Real Estate Broker agreement. Call us before you make a purchase and sale offer.