Homeowner’s Guide to Refinancing

We understand that refinancing is a big decision. Our licensed Mortgage Loan Originators are qualified to answer your questions as you determine if refinancing is right for you. We will walk you through each step of the refinancing process and keep you updated on the status of your loan from application to closing.

Your Refinancing Experience

Refinancing replaces your current mortgage with a new loan, consisting of a different rate, terms, and repayment factors. Behind the scenes, your current loan is repaid and replaced with a new loan consistent with the new financing terms.

There are many tangible benefits to refinancing, including possibly lowering your monthly payment, the potential to drop your monthly private mortgage insurance premium, or even taking cash out to renovate your home or consolidate debt.

Let’s take a look at the different refinancing options available to borrowers and the steps you can take to refinance your home loan.

Loan Options To Consider

FHA Streamline – Federally backed loans offered at competitive rates with fixed terms available.

• No Appraisal – This option typically does not require a new property appraisal

• No Income Documents Needed – Employment is verified without paycheck stubs or W2s

• Closing Costs – Lender credits may be available to cover certain closing costs

Conventional – A conventional loan is not guaranteed by a government agency, and may be a fixed or adjustable-rate mortgage, with either a conforming loan amount (with limits determined by property county) or larger (jumbo) loan amounts.

• No Private Mortgage Insurance – Conventional loan terms may be better than an existing FHA or VA mortgage, and with sufficient equity in the home (at least 20%) the new loan will not require the added expense of mortgage insurance

FHA 203(K) Streamline Rehabilitation Loan – Refinance with this loan program to help cover home improvement and repair costs.

• Funds available up to $35,000
• Get money for home improvements or repairs
• Wide variety of repairs covered, including roofs, kitchens/bath remodels, flooring, appliance, plumbing/electrical repairs

VA IRRRL – With our VA Interest Rate Reduction Refinance Loan, Veterans or surviving spouses with a current VA mortgage can take advantage of historically low rates to refinance with no appraisal and no income/asset documentation required.

• No Appraisal (in most cases)
• No Income/Asset Documentation
• Roll Closing Costs Into Loan
• No Private Mortgage Insurance

Things To Do:

1. DO continue making your mortgage or rent payments & stay current on all existing accounts.
2. DO continue living at your current residence
3. DO be prepared to source all deposits.
4. DO ask your loan officer before making any financial decisions throughout the loan process.
5. DO alert us if your salary or compensation changes from what is documented on your loan app.
6. DO check your credit report at least once a year.

Things To Avoid

1. DON’T apply, open or close any credit card accounts or close bank accounts.
2. DON’T make major purchases (i.e. car, major appliance, etc).
3. DON’T transfer any balances from one account to another.
4. DON’T share your credit details with anyone unless you initiate a transaction.
5. DON’T run your credit before asking your loan officer first.
6. DON’T quit your job.

FAQs About Refinancing

How does a refinance work? When refinancing a mortgage loan, the first loan is paid off and a second loan is created – typically with a better interest rate and/or term

Will my house need to be appraised again? An appraisal may be required depending on the loan type. However, not all loan types require an appraisal.

How much does refinancing cost? Refinancing does cost money, but that doesn’t necessarily mean there will be out-of-pocket costs. In some cases, certain costs can be built into the new loan. According to Trulia, common costs associated with refinancing include fees for an appraisal (if required), title report, loan origination, attorney (in some states), flood certification, and the county recorder.

How does a cash-out refinance differ from a No Cash-Out refinance? A no cash-out refinance differs from a cash-out refinance in that you are just paying off the associated first mortgage (in most cases) on a qualified property. This option is typically used to secure more favorable repayment terms rather than to take cash out of the property.

In some cases, funds can be used to pay off subordinate financing, but only if the junior lien was used to purchase the property or is an affordable second mortgage (such as from a grant or other affordable housing assistance program). Borrowers are limited to receiving no more than the lesser of 2% of the new refinance loan amount or $2,000 cash back at closing, according to the Fannie Mae Selling Guide.

What are the advantages of a refinance? Refinancing can come with a multitude of potential benefits, whether you wish to take cash out of a property or simply seek better repayment terms. Refinancing allows homeowners to obtain a new mortgage in order to reduce monthly mortgage payments, change the terms of a loan, take cash out for large purchases or switch mortgage companies. Many homeowners consider refinancing when they have equity built up and can use it to take advantage of one of these potential benefits.

Why would I consider not refinancing? Refinancing is a great option for many, but may not be the right loan solution for all homeowners. In some cases, it may be advisable to compare a cash-out refinance with a home equity line of credit (HELOC). If a homeowner is planning to move in the near future, a purchase loan may be a better fit. Call your Loan Originator today to see what may work best for your specific situation.

Time for a Mortgage Review

We would love to provide a complimentary mortgage review for you. Since you purchased your home, interest rates may have changed, home values may have increased, and other factors that affect the mortgage market are always changing.

A mortgage review gives us the opportunity to discuss the current market and answer any questions you may have regarding escrows, mortgage insurance, or even your credit score.