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Are you planning to get a mortgage refinancing in Houston, TX? Our experienced mortgage consultants can help you compare mortgage options to lower your payments. Call us Now!
Refinancing: Everything You Need to Know
Why refinancing? What is it exactly and what are its benefits? What do I need to qualify? Do I need to complete another appraisal? Do you want answers to all these questions? Here we go!
Refinancing your house, which is a financial asset, is a way of leveraging your investment. There may be innumerable reasons for refinancing like acquiring cash, decreasing your monthly loan payment, and shortening the term of your loan. Let's dive in to know how mortgage refinancing works.
What Is Refinancing?
When you acquire a new loan for your house, it is called mortgage refinancing which helps you pay off the old loan, thereby leaving you with one loan and its new monthly payment.
There may be a variety of reasons for refinancing. You can utilize a cash-out refinance or a rate and term refinance to take advantage of your home's equity or to acquire a cheaper interest rate.
Another common reason for refinancing includes the need to remove from loan and title a co-signer on a mortgage or simply a party to the original transaction especially after divorce. Once you submit our pre-approval request form, and we complete your application plus receive the list of documents, we will explain your options. But let’s keep reviewing the refinance process.
How Does Refinancing Work?
The process of refinancing involves similar steps as buying a home. However, refinancing is a bit easier and usually takes 30 to 45 days. Let’s dive deep into the refinancing process:
To refinance, you need to mostly provide the same information during buying the house. We will analyze your income, assets, debt, and credit score to see if you qualify for refinancing and can afford to repay the new loan. Therefore, you need to provide the following documents to us:
● Pay stubs from the last month (Two paystubs if paid biweekly or 4 if paid weekly).
● W-2s from the last two years.
● Asset accounts such as bank statements from the last two months.
● Copy of current homeowner’s insurance.
● Last mortgage statement.
● Copy of the Survey included on your last mortgage loan package to save over $400.
If married and spouse will be in the loan, then spouse needs to undergo same paperwork. Also, if you are self-employed, you will need to provide copies of your personal income taxes as well as business taxes if filed when the borrower owns over 25% of the company.
In many instances, while refinancing, we may recommend switching to a new lender offering better terms. In that case, your new lender will pay off your current debt at closing, thus ending your connection with the previous one.
Locking In Your Interest Rate:
You shall have the opportunity to lock your interest rate after you've been authorized so it doesn't change until the loan closes.
The duration of the rate lock period is determined by several factors such as the loan type, its terms, and/or the lender but the most common duration goes from 15 to 60 days. If you do not close your loan before the expiration of the rate lock, you will need to extend the rate lock which may incur additional expenses.
You may also have the opportunity to "float" your rate, which means that you won't have to lock it in before moving through with the loan. This may help you get a cheaper rate, but also increases your chances of receiving a higher one. Some situations may help you get the best with the float-down option, but it's usually a smart idea to lock your rate if you are pleased with it at the time of applying.
Once we have the application completed and your complete set of documents, we will submit all information to the underwriting dept. to examine your financial information and ensure that everything is correct.
Once the new loan is fully underwritten, we will receive a conditional approval asking to for instance verify the value of the house with an appraisal, verify employment, request transcripts to IRS, obtain a new title commitment, may request an insurance extension coverage to include few examples of conditions.
If you are refinancing to get cash out or a Texas 50(a)(6) loan, the value of your property will affect how much money you can obtain. If you are looking to save money on your mortgage, the value of your house might affect whether you have enough equity to get rid of private mortgage insurance or simply to qualify for a certain loan.
Before we complete your refinance, we must receive an appraisal ordered thru any of the approved Appraisal Management Companies serving the market of Texas. The appraiser will examine your property and give us a report with the net worth of your home.
We always recommend you prepare your house to look at its best to prepare for the evaluation. To make a good first impression, clean up and make any small repairs if required. It's also a good idea to make a list of any improvements you've made in the house since you've owned it.
Provided all conditions are cleared, the underwriting will be final approving your loan if the home's worth is equal to or more than the loan amount you wish to refinance.
However, if the estimate turns out to be too low, then you have the option of lowering the amount of money you wish to borrow via the refinance, pay down the balance of your mortgage to close the new loan with an improved interest rate or simply canceling your application.
Closing On Your New Loan:
It's time to finalize your loan once the underwriting and house assessment are complete. Once we obtain the final approval, we will send you a Closing Disclosure where you'll find all the final figures of your loan.
A refinancing closure takes less time compared to that of a home purchase. We may send a mobile notary to come to you to sign loan closing documents or ask you to attend to the title company to attend the closing.
You need to go through the loan specifics and sign the loan paperwork at closing. Any closing expenses that aren't included in the loan need to be paid at this time. If you are requesting a cash out on your primary residence, you will get the funds after the rescission period which lasts 3 days after closing. If we are refinancing an investment property you will get funds the same day as a closing date.
When refinancing a primary residence, there is a rescission period that lasts 3 days allowing you to cancel your refinancing should something unexpected occur. If so you can exercise your right of rescission.
4 Reasons to Refinance Your Mortgage:
Let’s get into some of the reasons why refinancing is important.
1. Extend the term of your loan - Many consumers refinance to reduce the length of their loan term and save money on interest. You may also extend the period of your loan to reduce your monthly cost. If you decide to shorten your term make sure new payment will be reasonable in case of an economic downturn where salaries may suffer a decrease making it hard to repay the new loan.
2. Lower Your Rate of Interest - Interest rates are constantly fluctuating. If interest rates are lower now than when you got the loan, refinancing may make sense. Your monthly payment will be lower if your interest rate is lower, and you will pay less interest throughout the term of your loan.
3. Alter the Loan Type - A different form of loan may be beneficial for a variety of reasons. Perhaps you took out an adjustable-rate mortgage (ARM) to save money on interest, but now you want to convert it to a fixed-rate mortgage while interest rates are still low. It is possible that you have enough equity now to convert your FHA loan into a conventional loan without having to pay private mortgage insurance.
4. Cash Out Your Equity - A cash-out refinancing allows you to borrow more money than you owe on your property and keep the difference. If the value of your house has improved, you may be able to borrow money to pay for home improvements, debt consolidation, or other costs. Borrowing money using cash from your house has a considerably cheaper interest rate than other loan options.
What Does It Cost to Refinance?
The overall cost of refinancing is determined by a variety of factors, including the loan type, loan amount, and sometimes the loan amount in relation to the value of the house at the time refinance is requested. In any case, we will look for the best option loan terms and present them to compare and decide what makes the most sense.
The good news is that you might not have to pay such expenses out of your own pocket if you refinance. You may be able to include all costs to refinancing in your loan instead of paying them out of pocket.
When Should You Refinance Your Mortgage?
When determining whether or not to refinance, there are several things to consider. Take into account market developments, current interest rate as well as your own financial situation and credit score. When calculating your break-even point after refinancing expenditures, it's a good idea to utilize our mortgage calculator to compare payments and amortizations.
The Bottom Line
Refinancing is a fantastic method to leverage your house as a financial tool when the time comes. To save money in the long run, you can shorten your loan term, acquire a better interest rate, and switch loan types. Alternatively, you can cash out your home's equity and spend the funds as per your needs.
What are you waiting for? Go, get your mortgage refinancing in Houston, Texas now!
Don't wait any longer and find out how much you can get Approved for.
Whether you are considering refinancing a mortgage loan as a rate & term or cash-out loan, Clear Lending can help you with a Refinance Loan Program. Simply complete our secure and encrypted Pre-Approval Form online and we will contact you right away to review the best options for you.
Not all applicants will qualify. This advertisement is not an offer for an extension of credit. Please meet with a licensed loan originator for more information as programs are available only to qualified borrowers. Program rates, fees, terms, and programs are subject to change without notice. Not all loans, loan sizes, or products may apply. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet loan-to-value requirements, and final credit approval. Approvals are subject to underwriting guidelines and program guidelines and are subject to change without notice. Some restrictions may apply.
Joan and his team were extremely helpful and really attentive to our needs while going through our loan process. They made sure the VA process went smoothly as well. I would recommend Clear Lending to all looking to buy a house.
Thank you soooo much Joan, Patricia and Samantha for helping us purchase our first home ever. My wife and I are so thankful there are no words to express the joy we feel each time we open the door of our house. I say to my wife… wait is this our house? Then I remember that yes, we just closed few days ago…. LOL. Jokes aside everything you Joan have done for us ever since day one is beyond any words of appreciation. In our case, we truly feel you have been godsent. I still remember the day my wife and I went to Wells Fargo to be told our chances were very limited due to my taxes’ deductions and so we needed to wait 2 possibly 3 years???? My own bank Wells Fargo, Bank of America, Chase, Capital One and God knows how many places we tried. Each one gave us similar reasons but at the end the message was that we didn’t qualify and zero instructions. Well yes, the instructions were that our taxes didn’t reveal the true picture and health of my business operations. Great and now what? Nothing. And so, I stopped searching. Sometime later after talking to a client about my hopeless attempt to buy a house, he told me about a loan officer who showed up from time to time in the radio station offering home loan programs traditional banks would not offer. And so, I started googling until I found Clear Lending. I asked my colleague and bingo! This was the company. And so, I applied online, got a call back very fast, completed an application over the phone, sent income documents and then I was asked to go with my wife at their office. After one hour or so, I was given precise instructions to become a home owner with a government loan program. All I remember was… “If you follow my advice, we will make it happen”. And a year later, Joan got us the house of our dreams, negotiated best deal to cover most closing costs and closed our loan with a 4.25% interest rate when my own was offering me 4.875%???? I am so thankful I found this guy I still cannot believe the miracle he worked for us. Again, thank you Joan and your team for being a true servant and valuable tool to make possible what for me I was told bank after bank to stop searching as it was not possible. I will always refer you absolutely everyone desiring to buy a house. You are indeed the miracle man!!!!
Joan with Clear Lending is direct, honest and very helpful. We were very lucky to have him. He is very easy to communicate with. He gives you a clear view of your loan situation and then he helps and guides you in each and every step. Ours was not an easy transaction but he was there guiding us the whole time. We got our loan but even if it didn't go our way, I would gladly use him again and very proudly recommend him to anyone.