Conventionally refinancing your mortgage or tapping your home’s equity with a line of credit is so 2006. To loan refinance today, you may have to put cash in to the deal. At the peak of the real estate bubble, homeowners viewed their properties as bank ATMs with easy “cash-out” refinancing options at inflated house prices. Now, with so many mortgages underwater versus the appraisal value of the property and lenders requiring at most a loan-to-value (LTV) ratio of 80% (meaning you need to have equity of at least 20%), some people wanting to take advantage of today’s historically low rates are adding cash to make up the difference. Should you do the same?

Put cash into your home only if you have extra funds available and:

• You can significantly lower your mortgage rate. Locking in today’s 30-year fixed loan at about 4.3% requires a maximum LTV of 75%-80% so be ready to add cash to bring down your loan-to-value to within the required range. This is also ideal for someone with a current jumbo loan who is very close to the conforming cutoff ($417,000 loan for single-family homes). Add enough money to get out of the jumbo mortgage rates and save big: the difference between a 30-year fixed jumbo loan and a 30-year fixed conforming loan is about 1.3% right now.
• You want to avoid private mortgage insurance (PMI) by lowering your loan-to-value ratio to less than 80%. On average, PMI costs about $1500 per year on a $300,000 mortgage.
• You would like to pay off your mortgage faster by refinancing a 30-year loan into a 15-year loan. Even with the extra cash paid in, your monthly mortgage payments will be higher on a loan with a shorter amortization term, but you will save thousands in total interest over the life of the mortgage.

Keep your money if:

• You intend to stay in your house for less than 5 years. Even with the extremely low interest rates, it will take several years of these lower mortgage payments through a conventional refinance deal just to recoup your closing costs.
• Your credit score is not very good. If your credit score is low, you won’t qualify for the super-low rates you see advertised today. In fact, homeowners with a FICO score of less than 680 probably won’t get a low enough interest rate to make a “cash-in” refinance succeed.
• You are struggling with current expenses and bills. If you need to draw down your emergency reserve fund to consider a “cash-in” refinance deal, then don’t. You do not want to be completely illiquid (with all funds sunk into your home) should disaster strike.

1. Remove all clutter as much as possible, even renting a moveable storage pod if you have to
2. Take down personal photos and religious icons, as appealing to the broadest customer base is essential
3. Patch and touch up any walls that are scuffed, damaged or simply dirty
4. Use area rugs over any spots or stains on the carpets, especially in high traffic areas
5. Light some comfort-scented candles (think apple pie, cinnamon, pumpkin) in the kitchen
6. Make a one-page color info sheet of your property, with pictures and all relevant details
7. Stock bottles of water in a tasteful ice tub on the kitchen counter for guests to enjoy
8. Ensure your children and pets have somewhere else to be that day, again you don’t want to alienate visitors
9. Turn on all lights and ceiling fans in all rooms and open all blinds, curtains, etc
10. Be available to answer any questions, but stay in one place and do not follow people around

A credit score, often simply called a FICO score, is the number that accompanies your credit report, is used by lenders in determining your overall creditworthiness and was created by the Fair Isaac Corporation, hence the familiar name FICO. An excellent score is over 800, a good score is considered to be over 700, an average score is 600 and a bad score is under 500.

Achieving a FICO score above 800 puts you in an elite group of Americans (only 18% of the population rate this high) and the most important factor considered is payment history, which is said to comprise 35% of your score. The next biggest factor is amounts owed at 30% impact, then length of credit history at 15%, with types of credit used and new credit each accounting for 10%. However, striving for the perfect 850 rating is not necessary – whether you score 780 or the highest score possible, you will still qualify for the same best rates. To know your exact FICO credit score, you can visit MyFico to view two of the three reports from the major credit bureaus: Equifax and Experian (TransUnion does not sell its FICO score to consumers). Your score will be different with each reporting agency, anywhere from 15-20 points, and lenders typically use an average of all 3 FICO scores.

So what can you do to raise your credit score?

• Monitor your credit reports – You are entitled to one free copy per year from each bureau and you can get them at AnnualCreditReport then look them over for misreported delinquencies, over-reported loan amounts and under-reported credit limits. Request corrections with each bureau in writing.
• Pay your bills on time – Lenders report late payments to the bureau once you are 30 days past the due date, so set up payment reminders or automatic bill pay. Just one delinquency can drop your credit score 100 points.
• Pay off credit card debt – Paying down revolving debt boosts your credit score much more than erasing installment loans. Wiping away a few thousand dollars from your credit cards can add 100 points to your FICO score.
• Stay below 10% – Paying your credit card balances each month does not mean you have zero usage. Card issuers report to the credit bureaus the total amount you charge each month, so use plastic sparingly (only 10% of the credit limit) and stop using credit cards completely before applying for a big loan.
• Have a preferred card – FICO penalizes you for having multiple credit card balances, so limit the bulk of spending to your favorite card. With issuers closing inactive accounts, make small charges to your other cards every 3 months to keep them open.