Mortgage

The refinancing course of in 6 steps: timeline to closing

Would you like to refinance your home?

Mortgage rates are still at all-time lows and over 12 million homeowners could benefit from refinancing in today's environment.

But how does refinancing your home work?

Fortunately, the refinancing process is relatively easy. It's easy to explore your options and apply for a new home loan.

With a clear understanding of the refinancing process, you will be better equipped to get approved and find the best deal. How to start.

Start Your Mortgage Refinancing Today (July 15, 2021)

In this article (continue to …)

Step 1: Set your funding goals

The first step in the refinancing process is to set a clear goal. Find out what benefits you can expect from mortgage refinancing and what type of loan will help you with it.

There are a number of reasons homeowners may choose to refinance. For example:

Are you trying to save money right away by lowering your monthly payment? Are you looking to save money in the long run by reducing your 30 year loan to 15 years? Would you like to remove Private Mortgage Insurance (PMI) or FHA Mortgage Insurance? Would you like to have your home equity paid out?

Taking out a new home loan can help you achieve any of these goals. But you need to choose the right refinancing strategy to get what you want to get.

There are three main types of refinancing loans:

Price and duration: Lower your interest rate, shorten your repayment term, or maybe both. You can reduce your monthly mortgage payment and save interest during the life of the loanPay off: Get your home equity capital and use the money for home improvements, debt consolidation, emergency funds, or any other purposeTariff conversion: Convert your adjustable rate (ARM) mortgage to a fixed rate mortgage to avoid future interest rate hikes or mortgage payments

You also need to choose which loan product to use: Conventional, Jumbo, FHA, VA, or USDA.

Many homeowners stick with the same type of loan that they currently have. However, switching to a different type of loan could have additional benefits.

Your loan officer can help you understand your refinancing options and choose the best loan for your financial situation.

Step 2: Obtain refinancing rates from multiple lenders

Now that you have decided to consider refinancing, it is time to get your mortgage offers. You should apply for pre-approval from a few different lenders to ensure you are getting the best deal on your new loan.

Refinancing rates can vary widely from lender to lender. And a lower interest rate can mean significant savings – especially in the long run.

But remember, there is more to it than the lowest rate.

The closing cost of refinancing is typically a few thousand dollars – just like buying your home. And the higher your upfront fees, the more they consume your savings. So look for the lowest closing costs, as well as the lowest interest rate.

Also, keep in mind that different loan programs have different refinancing rates. For example, VA rates, conventional rates, and FHA loan rates can all vary widely.

Prices can also change from day to day, so it is helpful to have your refinancing offers on the same day.

Compare your refinancing rates today. Start here (07/15/2021)

Step 3: Compare prices and fees

To ensure that you are getting the best deal possible, you should seek multiple quotes from different lenders.

But how do you even know if a lender is offering the best deal?

First, compare credit estimates.

The loan estimate is a standard three-page document provided by lenders. This form provides you with important information, including the estimated interest rate, the monthly payment, and the total cost of the loan.

The loan estimate also provides additional important information that can be helpful when shopping and comparing refinancing offers.

For example, on the second page of the loan estimate, you can see and compare lending fees. These vary significantly from lender to lender, so you can save big money shopping for the lowest upfront commitment fee.

Another great tool for mortgage borrowers can be found on page three.

In the comparisons section you can see and compare how much you have paid in 5 years, how much of those payments have been used for principal and interest, and you can also find your APR (annual percentage).

Don't forget to check to see if there are any prepayment penalties associated with your loan. Most mortgages today have no prepayment penalties, but just check to be sure.

Once you've compared your LEs side by side, you will have a much more complete understanding of which lender is really offering the best deal on your new mortgage.

Step 4: Submit your documents

After you've selected your lender and the type of refinancing loan that best suits your needs, it's time to fill out your loan application and submit your paperwork.

This is an important part of the process as it can affect many different areas, such as: B. The time it takes to complete your loan.

The time it takes to complete your loan is important for a number of reasons. Mainly – your rate lock. If you don't close before your plan expires, you may incur costly renewal fees.

Submitting all documents on time will help ensure that your loan is completed on time.

The documents required for refinancing usually include:

Pay slips for 30 daysBank statements for the last two monthsW2s and / or 1099s for the last two yearsTax returns for the last two yearsAsset statements for the last 60 daysProof of homeowner insurance

Other documents may be required depending on the type of loan you are applying for and the details of your particular loan profile.

For example, a self-employed person has to submit more documents than a W2 employee. Someone who is retired and on social security and / or a pension has other requirements as well.

Additional documents may be required depending on your situation and the type of loan you are applying for. Your lender will provide you with a full list of the required documents.

Step 5: evaluation and underwriting

The next step in the refinancing process is to conduct a home valuation and underwriting.

Your lender will order a new home valuation to check your current home value. The underwriter will review your records and offer conditional and / or definitive approval for your new loan.

Processing times for underwriting can vary widely. Some lenders can take out a refinancing loan within days while others take a few weeks.

The duration of the underwriting depends on the current volume of the lender, the complexity of your application and the availability of appraisers. An assessment alone can often take one to two weeks.

As a borrower, this part of the refinancing process is mostly a waiting game. But you can often shorten the approval time by having all your documents available immediately and responding to additional requests as quickly as possible.

Step 6: graduation day

Completing your refinance is the final step in the process. Almost.

When refinancing you come across the "right of withdrawal". This is a mandatory three day waiting period before your loan is funded. It gives homeowners a little window to cancel their refinance loan if they change their mind.

As with your first mortgage, assuming you take out your loan, you have a deal day and sign the final papers.

To make sure your closing day goes as smoothly as possible, consider the following steps:

Stay in close touch with your lender in the days leading up to the deal. This way, you can ensure that you have all the necessary documents and financial arrangements for the mortgage. Be especially careful not to apply for additional credit or to use credit cards more often than usual. Make sure that your credit profile was as close as possible to the one when you applied for your credit

Today, lenders are required to issue a Closing Disclosure (CD) within three days of closing.

The interest rate, terms, and closing costs on your CD should exactly match those on your loan estimate.

Mortgage borrowers should compare their credit estimate and financial statements for errors. You should carefully review these documents with your lender.

Start Your Mortgage Refinancing Today (July 15, 2021)

The refinancing process: FAQ

How does the refinancing process work?

Refinancing replaces your existing loan with a new one. When refinancing, you apply for a new mortgage, just like you would when you bought your home. Once approved, the funds from your new loan will be used to pay off your existing mortgage. This effectively replaces your old home loan with a new one – usually with a lower interest rate, monthly payment, or other benefit.

How long does the refinancing process take?

Some lenders take longer to complete a refinance than others. Usually banks and credit unions take a little longer than online lenders. Most lenders average between 30 and 45 days for a mortgage refinance.

How do I qualify for home equity refinancing?

You must meet certain criteria for mortgage refinancing. Refinancing requires a stable income, decent credit score, an acceptable debt to income ratio, and at least some home ownership.

Will refinancing harm my creditworthiness?

According to FICO, a tough request from a lender lowers your credit score by five points or less. If you have a solid credit history and no other credit problems, the impact can be even less. And the decline is temporary. Your results will usually bounce back within a few months, provided everything else in your credit history stays positive. Fortunately, most credit rating companies count multiple mortgage loan requests as one if they are made within a specified time period (14-30 days). This allows you to apply to a few different lenders without multiple charges on your credit.

How much does a refinancing cost?

The closing cost of refinancing a mortgage is similar to the cost of buying a home. Closing costs in the United States average between 2 and 5 percent of the loan amount. That's $ 2,000 to $ 5,000 for every $ 100,000 you borrow. However, there are certain costs, such as B. Property rights insurance, which does not apply to refinancing, which means that the refi fees are slightly lower than the fees for buying a house.

Do I need a refinancing report?

Some refinancing programs do not require ratings. FHA Streamline Refinances and VA Interest Rate Reduction Refinance Loans (VA IRRRL) usually do not require an assessment. Most of the others require assessment.

Do you get your money back when you refinance?

If you are approved, you can absolutely get cashback on refinance. Typically, these types of loans are considered cash out refinances. Prices and fees can sometimes be higher for these. Be sure and check with your lender to see if your goal is to get cash back.

What is the downside of refinancing?

The main disadvantage of any type of refinancing is the cost associated with the loan. Even a "no-closing-cost refinancing" still has costs in the form of a higher interest rate or a larger loan amount. The other disadvantage of refinancing is that your loan will start over. So if your home is almost paid off and you want to cash out your equity, you may prefer a home equity loan or HELOC to refinance.

How often can you refinance?

In most cases, you can refinance as many times as you want. However, some lenders look for a "seasoning" period between home loans or a period of time between assessments. Typically, you have to wait six months before you can refinance with the same lender.

Should I refinance with my current mortgage lender?

If you are happy with your current lender, this could be motivation enough to refinance with the same company. While the benefits of good customer service are important, you should still ensure that your existing mortgage lender can meet your refinancing goals before proceeding. Check with some other lenders before signing up to make sure your current lender is truly offering the lowest rates and fees.

Should You Refinance?

Thanks to persistently low interest rates and the significant increase in home value, millions of homeowners have ample incentive to refinance.

However, refinancing is not the right move for everyone. You need to make sure that a new loan really benefits you – whether through a lower interest rate, cashback, or other benefits.

Check your loan options with a lender. If you can save money in the long run, refinancing is probably the right move.

Confirm your new plan (July 15, 2021)

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