Refinance:
The Process
The Loan Application Process
We will want to verify certain information about you and the property. The information will include income and employment, assets, and your credit history. Credit history, will be obtained directly from the credit bureaus. We will order an appraisal in most cases and a legal description of the property, such as a title report.
The Loan Approval Process
During the "processing" and/or "underwriting" period, your credit, assets, income and other determinants are checked and compiled. Your loan is either approved with conditions, or approved without conditions or declined. Conditions are further documentation or checks we will need to finalize your loan before funds can be dispersed. Some borrowers become frustrated by conditions that surface at the end of a loan transaction and can't understand why they are being raised so late. Final conditions are sometimes added for final approval. We do our best to help you through the process - remember, we are simply trying to meet conditions imposed by other sources.
IMPORTANT NOTE: Do not make any adverse changes to your financial "picture" during the loan process. Things as simple as applying for a new department store credit card to purchase a new appliance will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Many times a final credit report update and additional calls to your employer may be required before funding the loan. Be patient and your loan will flow smoothly.
WHY TO REFINANCE
There are five major reasons to consider refinancing an existing mortgage:
Decrease monthly payments from a higher fixed rate to a lower fixed rate.
Example: If the rate is 7.5% now and a homeowner switches to a 6.5% rate, he or she will save 1% on the mortgage less the costs of refinancing. On a $200,000 mortgage, for example, the savings will be over $50,000 over 30 years by reducing the interest rate by just that one percentage point.
Improve monthly cash flow with lower payments.
Cash flow may be tight after moving into a new home. Switching to an adjustable rate program where the rate is fixed for the next three to ten years could provide breathing room needed. Similarly, for those who are in a 15 or 20 year term loan, switching to a 30 year term can also increase monthly cash flow.
Switch to a fixed rate program to eliminate payment changes of adjustable rate mortgages (ARMs). Homeowners with one year ARMs will see their rates rise as rates move up. Using programs that hold rates steady for three, five or seven years, you can refinance into a low fixed rate.
Withdraw funds from the equity in a home.
If cash is needed for home improvements, college education or to consolidate debts, the borrower may be able to refinance 75% to 80% of the current value of the home if it has been owned for one year or more.
Shorter loan terms
Probably the best incentive to refinance is found by refinancing into a shorter term loan while keeping the loan payment stable. A borrower can save tens of thousands in interest by reducing the term of the loan.
