Are you considering refinancing your home loan?
If the answer is yes, then you're in the right place. Understanding the refinancing process is the first step in achieving your financial goals. The home.loans belief is that the more you know, the easier it will be for you to get the home financing you deserve. This definitely holds true for homeowners who would like to refinance, but don't know where to start. With that in mind, we have broken down the entire refinance process into a few simple steps.
Determine your Refinance Goals
It may seem obvious to some, but the first thing any homeowner should do when considering refinancing their mortgage is to figure out why they want to refinance, and what they hope to get out of it. Refinancing your mortgage can be an incredibly useful strategy for saving money, or simply restructuring your budget. Some refinance options allow homeowners to tap into the equity in their homes, effectively providing funds for renovations or consolidating debt. Start by defining your refinance goals in order to choose the perfect loan product.
Popular reasons for Refinancing your mortgage:
- Reducing your monthly payment
- Changing from an adjustable-rate mortgage to a fixed-rate mortgage (or vice-versa)
- Reducing your loan term
- Increasing your loan term
- Reducing your interest rate
- Tapping in to your home equity
- Switching to a more favorable loan product
- Dropping private mortgage insurance (if your LTV is low enough)
Setting your refinance goals will give you a clearer picture of what to look for in your next loan agreement. Lower payments may be good enough for some, but you never know what else you may be able to accomplish through refinancing unless you take the time to see what other options you have.
Speak with a Mortgage Specialist
Once you've come up with your refinancing goals, get in touch with an experienced mortgage professional. It can be through email correspondence, a phone call, or even a scheduled meet up. At this point in time you should also have plenty of questions, and this is the perfect time to get your answers.
Inquire about all of the different loan products that fit your goals and the eligibility requirements of each. Ask about closing costs, or any fees associated with the loan products that interest you. Use this time to really feel out your options. Most importantly, take your time. You want to be confident in your decision, so try not to skip over any details.
Of course, we are more than happy to consult with you about your refinance options. Empowering homeowners through education is kind of our thing! Fill out the form below, and we'll put you in touch with a mortgage specialist for a risk-free consultation.
Choose Your Loan Product
After having some one on one time with a mortgage specialist, the next step is to select one of the many loan products on the market. Remember, you will be replacing the home loan that you have now with new loan terms, a new interest rate, or a new monthly payment amount (or some combination of these). In your consultation, hopefully you discussed which loan products suit your goals and financial profile the best, and have narrowed your options down to that perfect refinancing solution. What type of loan works best for you? Here are the most popular loan options on the market:
Home Loan Options:
No matter which option works best for you, you'll want to shop around for the lowest rates. You may also have access to refinance programs such as:
- HARP Refinance
- FHA Streamline Refinance
- FHA Cash Out Refinance
- VA Streamline Refinance
- VA Cash Out Refinance
Once you're all set with the loan option that you want, all you have to do is lock in the loan terms and rate of your choosing with your mortgage specialist or loan officer. Generally, lenders charge a fee for this, but most of the time it can be rolled into the closing cost of the new loan agreement.
Organizing and Submitting Borrower Documentation
Organizing your documentation as a borrower is critical. Missing paperwork will slow down the entire refinance process, and cost you valuable time. Not all lenders or loan programs require the same documents, either. For example, Using the FHA streamline or VA Streamline refinance programs means less paperwork for you to bring in, since those programs piggyback off of the original loan's documentation. Don't worry though, once you've locked in the loan option, your loan officer should send you a checklist of paperwork for your refinance. Just in case, however, here are the most common documents requested by lenders:
Refinance Document Checklist:
- Social Security card
- Employer information (past two years)
- Gross monthly income from current job(s)
- Pertinent banking (checking and savings accounts) information
- Up-to-date status on all open loans
- Approximate value of all assets
- Certificate of Eligibility and DD Form 214 (for U.S. veterans)
- W-2 forms (past 2 years)
- Pay stubs (past 2 years)
- Self-employed individuals must provide personal tax returns (past two years), current income statement, and business balance sheet
Closing on Your New Loan Agreement
Closing on a home loan can be a lengthy process, but if you tough it out just a little longer, you'll be finished with the refinance process in no time.
Working closely with your lender, you'll want to have all of the necessary documentation requested (or mentioned in the previous section) on hand. The next few steps can be a little tedious, but you'll want to make sure that you do them right. Depending on your refinance decisions, you may need to get a full title report, open an escrow account, or schedule an appraisal of your home. Once these things check out to both the lender and your satisfaction, it's time to submit your documents and loan application for review.
If your application is approved it's just a small matter of scheduling a signing appointment. After those documents are signed (it shouldn't take more than an hour) and sent to the lender in charge of your new loan agreement, you've officially refinanced your home loan. Congratulations!
Now all you have to do is figure out what to do with all the money you'll be saving.