Refinancing

REFINANCING YOUR LOAN

You have a loan for your home and things have been going well. You’ve been making your payments on time and the terms agreed to have served you thus far, but there is never a bad time to reevaluate your options and see if it may be the right time for you to refinance your original loan. 

When you refinance, essentially you are able to renegotiate your current loan as a new loan to see if you have the opportunity to obtain a lower interest rate or a lower monthly payment. These options can be desirable for borrowers as their finances or needs change over time. 

Borrowers generally consider refinancing if they are interested in. . .

  1. Getting a lower monthly payment
  2. Taking out cash
  3. Shortening the lifespan of their original mortgage

If one or more of these reasons sounds like something you and your family might be interested in, read on to learn more!

SHOULD YOU REFINANCE?

If you have not yet paid off your original loan, refinancing may be a great option for you with opportunities for savings, flexibility, and benefits depending on your qualifications. What typically happens during a refinancing loan allows the borrower to take out a second loan on the original mortgage instead of creating a brand new mortgage. During this process, a borrower may be able to obtain a lower interest rate on the second loan, assuming that the borrower has a good credit score. Considering the application process will again look at the borrowers qualifications, refinancing is usually only recommended for applicants with good credit scores. For those with less than stellar scores, applying for a refinance can be a risky action. 

If you’re a homeowner with burdensome high mortgage payments, refinancing your loan to secure a lower monthly payment might be something beneficial to consider. If your can new interest rate is better than the previously offered rate by at least 2%, you are in good shape to try to refinance and successfully reduce your current interest rate. This can save you time and money in the long run when paying off your loan. 

REFINANCING TIPS

During this time, we’d recommend avoiding substantial credit card purchases, opening new credit cards, or opting in for large debts as this can create issues with your lender’s review process. Large purchases and new credit cards can lower your credit score. Individuals with higher credit scores are more likely to be approved, so it is in your best interest to grow or maintain your credit score if you are considering a refinance. It is good practice to submit your final documents to your broker within 24 hours of their request. Never be hesitant to follow up and check up the process as needed. 

Never shy away from asking your lender the tough questions and be prepared to do some research of your own to determine if your needs will be met through their program. Some questions that you’ll want to ask your lender may include. . .

  • Will you service my loan after it closes?
  • What are your rates?
  • Are you available to answer my questions throughout the week?
  • How have you helped clients in the past?
  • How long will it take me to get refinanced?

Before scheduling a meeting or making an initial call, it is important to prepare important documents, like your most recent pay stubs, your two most recent W-2 forms, as well as bank statements from the past two months.

GET AN APPRAISAL

Once you’ve sent in your application and your review process has begun, it’s time to get started with an underwriting and an appraisal.

During the underwriting process, it is the responsibility of our team to double check to make sure that all of the financial documents you have provided us match up with the requirements that have been set for the loan. We’ll keep you updated throughout this process and let you know if we require more from you.  

You can take a slight breather here since this process can take between one to two weeks, not including the time it takes to receive the results of the appraisal. An appraisal serves all parties as the final check to make sure that the value of your home is as stated by the home sellers. This process is done by taking nearby home conditions and values into account to estimate the market value of the property in question. 

CLOSING YOUR REFINANCE LOAN

Congratulations! Your refinance has been approved and it’s time to closing. You’ll be required to have the following documents ready for the final closing process:

  • A driver’s license or government-issued ID
  • A check made out for the total amount of closing costs (if requested)
  • Your Closing Disclosure
  • The phone numbers of your agent and lawyer in case any questions should arise

MANAGING YOUR NEW MORTGAGE

After closing on your new refinancing loan, it is your responsibility to make payments on time and arrange your personal finances. Your agent will always be available to answer any questions you have or assist you with exploring the options available to you should you ever have any difficulty making monthly payments in a timely manner.

The GEM Mortgage team is happy to answer more questions you may have about qualifications, processes, required materials and whether refinancing could be the right decision for you. Contact us today to speak with a mortgage professional and learn more!

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