To better understand the mortgage refinance process, let’s take a look at what refinancing means while also determining who refinancing benefits and when to do a home refinance.
What is a Mortgage?
A mortgage is a loan from a bank or other financial institution that helps a borrower purchase a home. Each mortgage has an interest rate associated with it. This rate can be the difference between thousands of dollars spent and thousands of dollars saved. Interest rates are always changing. Sometimes they are high and sometimes they are low and this affects the refinance process.
The Mortgage Refinance Process
The mortgage refinance process is the process of revising and replacing the terms of an existing mortgage. Most commonly done to reduce the interest rate, refinancing can also be done to change the payment schedule and other loan terms.
Who Does Mortgage Refinancing Benefit?
Refinancing may not be the most suitable option for everyone who has a mortgage, even when refinance interest rates are down. Though most homeowners likely received their loans when rates were much higher, is a low interest rate enough reason to refinance your mortgage? The answer is, it depends. Many factors go into determining if you should refinance. Working with an experienced mortgage lender can help you understand if it is the right decision for you.
Types of Refinancing
There are many different types of refinancing available through the refinance process.
You can put your hard-earned equity to great use with a cash out refinance that takes your home’s equity and puts money in your hand. Whether it be for simple home repairs, a total renovation, or to invest in another home, a cash out refinance may be a good option for you.
FHA Streamline Refinance
With an FHA streamline refinance, you can stop worrying about if you have enough money to make ends meet. An FHA refinance option can decrease your monthly payments and help you pay off other expenses. Check out some FHA requirements to better understand if it’s right for you.
VA Streamline Refinance
Past and present military members who currently own a home have the opportunity to refinance their home loan with a VA streamline refinance. This country’s brave soldiers and families are offered faster and easier refinance options with a VA refinance.
Regardless of the option you choose, here are the next steps in the refinance process.
Submit an Application
The refinance process starts with an application. Be prepared because similar to a mortgage application, the lender will require a minimum of
- One month of paystubs
- Two months of bank statements
- Two years of W-2s and federal tax returns
- A copy of your homeowners’ insurance policy
- A recent mortgage statement
- A list of your current debts
- Proof of supplemental income (if applicable)
Choosing to work with a direct mortgage lender with a digital advantage will ensure you save time and money during the refinance process.
Lock in Your Loan
Locking in your loan is an important part of the refinance process because it solidifies your interest rate. This way, even if rates increase, your refinance rate stays the same.