refinance

6 questions to ask before a refinance

Do I have equity in my home?
Do I have equity in my home?

Homeowners need to have at least 20 percent equity in their home to qualify for a new loan without paying private mortgage insurance. Adding PMI to the cost of a new loan could negate the benefit of a refinance.

Today, many homeowners are underwater -- meaning they owe more on their mortgages than the house is worth. However, being underwater or having little equity does not necessarily rule out a refi.

"Homeowners should still apply for a refinance even if they have low equity, because there are some Fannie Mae and Freddie Mac programs and FHA loans that may accept them," Hsieh says. "The best way to find out if you fit into a program is to go to a lender."

Roy Meshel, district vice president for W.J. Bradley Mortgage in Phoenix, recommends homeowners refinance quickly in case the housing slump deepens, causing values to depreciate even more.

Patrick Cunningham, vice president of Home Savings & Trust Mortgage based in Fairfax, Va., recommends an increasingly popular approach -- the so-called "cash-in" refinance.

"Some people are opting to bring cash to the settlement in order to pay down their loan balance to qualify for a refinance," he says.

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