The old rule of thumb for refinancing was to wait until you could lower your mortgage loan interest rate by at least 2 percent. That refinance rule no longer holds true. The new way to determine whether the time is right to refinance is if you can recoup your closing costs within six months of the refinancing the mortgage loan.
When you apply for a loan that exceeds 80 percent of the value of the home, you will have to pay private mortgage insurance (PMI). PMI protects the lender from the increased risk associated with low-down payment loans. So should you use your saved cash to put down on a home to avoid paying PMI?
Many lenders will allow you to roll your closing costs into your loan. And, many sellers will simply pay the closing costs of the buyer. These are both reasonable ways to help you pay your closing costs -- artificially inflating the sales price of the house may not be a good idea.
