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Is it time to refi or buy a home?

By Jennie L. Phipps · Bankrate.com
Wednesday, May 30, 2012
Posted: 3 pm ET

If you aren't yet retired and you have a mortgage at an interest rate that is higher than today's, now might be a good time to refinance the property.

Not only are rates very low -- take a look at Bankrate.com's mortgage calculator to see just how low -- but there are government programs available that make it easy for people whose loans are underwater to refinance without an appraisal or the need to bring lots of money to the table.

Some people who are expecting to have cash available at the time they retire might have factored a payoff or sale into their retirement planning, so an early refi might not look attractive. But counting your chickens before they hatch is never a good idea in these matters. The refis available today can be a terrific deal and a good insurance policy.

If you refinance through the latest Home Affordable Refinance Program, or HARP 2.0, the federal government is controlling how lenders do business and what they charge. This program doesn't require a new appraisal of your  property and -- other than verifying employment -- the lender is allowed to take your word for how much you earn. You do have to be current on your mortgage, and your credit rating will affect the interest rate and whether you are approved.

It also might make sense to purchase a property before you hang up your work boots. If you wait until after you retire to apply for a loan, some lenders won't take into account the total amount of your retirement assets. Instead, they'll base your ability to pay strictly on your cash flow, which for many retirees can look low -- especially on paper. This inflexibility is a result of new rules designed to limit the use of "stated income."  better known as "liar loans," which were among the factors behind the mortgage meltdown. But these rules can result in applicants with multimillion dollar nest eggs being turned down, according to reports from the real estate industry.

So get your ducks in a row while you still have a steady paycheck.

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