Interest rates are at an all-time low. You hear this non-stop and every time you listen to it, you think, does this apply to “me”?
All of these questions flood your brain, and you immediately dive into overwhelm mode.
No worries and no stress!
We do loans, this is what we do, and we’re pretty good at it.
Below are the most common questions asked. Please review the questions below, digest each question/answer, and then reach out to one of our loan officers for a consult.
Where do you start?
The first step is to establish your "why".
Why are you considering a refinance? Are you doing this to lower your interest rate? Has your credit score increased and you’re looking to refinance into a 15-year loan vs. the current 30-year loan*? Is the goal to pull out your equity as you need the funds for another purpose?
When Is It a Good Idea to Refinance?
A general rule of thumb is to refinance when interest rates drop one percentage point or more.
What types of refinances are there?
There are many types of refinance loans. The kind that’s best for you will depend on your situation and your "why". The most common types of refinance loans are below.
Rate - Term Refinance Loan
The fixed-rate or ARM that is completed for a lower rate or shorter term.
Cash-Out Refinance Loans
For individuals who have built up equity in their homes, cash-out refinance loans let you refinance and borrow against the equity in your home. This provides you with immediate, tax-free cash that you are allowed to use any way you like.
What do I need to qualify for a refinance?
Good Credit score: Your credit score is a three-digit number that represents your experience managing credit and loans. When you meet with us, we will be able to tell you the minimum credit score you need to qualify for each type of loan.
Debt-to-income ratio: This is a personal finance measure that compares the amount of debt you have to your overall income. This is a percentage that tells us how much of your money goes to regular, recurring expenses. The lower the percentage the more likely you can save money each month and more likely to successfully manage monthly payments.
Home equity: Your home equity is the percentage of your loan principal that you’ve paid off. We will require that you have at least some equity in your home before you can refinance.
How will this refinance affect my monthly payment?
The type of refinance you choose will affect your monthly mortgage payment. Your monthly payment will go down if you refinance to a lower APR and keep your term the same. If you refinance to a longer-term, your monthly payment will go down, but you’ll pay more in interest over time. If you refinance to a shorter-term, your monthly payment will increase, but you’ll own your home sooner.
We will discuss how the refinance you’re considering will affect your monthly payment. We should be able to take a look at your loan details and give you a close estimate of what you’ll pay monthly.
Will my lender change?
Not every mortgage lender services your loan in-house. Most lenders sell the loans, even the larger ones. Your servicer can ultimately change, but nothing about the terms of your loan change as your servicing transfers.
What types of closing costs will there be?
You must pay closing costs when you finalize your refinance, just like when you got your original loan. The specific closing costs you’ll pay vary depending on where you live and the lender you choose. Our fees are competitive in the marketplace.
The average refinance has closing costs that are equal to about 2% – 5% of the total value of the loan. We will go over what closing costs you’ll likely be responsible for. In addition, we will let you know if it is an option to roll your closing costs into your loan’s principal balance.
What is a Loan Estimate and Closing Disclosure?
Depending on when you obtained your original mortgage loan, you may be familiar with the Loan Estimate and Closing Disclosure process. You’ll receive a Loan Estimate within three business days of your application and the Closing Disclosure three business days before you close on your refinance. The disclosures will include information about your new term, rate, your APR, and any closing costs you must pay.
Whatever your why is, your first phone call should be to your lender. For all of the questions above, our expertise is to assist you in making the right decision to ultimately keep more money in your pocket.
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*15-year Conventional Fixed-Rate Loan: An interest rate of 2.375% (2.524% APR) on a $200,000 mortgage, you would make monthly payments of $1,321.84. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 76.92%.