Specifics of refinancing property and the steps to move forward with the process.
To refinance your home means that you are essentially throwing out your old mortgage and applying for a new one. This comes with a different principle and generally a lower monthly payment. The new mortgage is what your lender will use to pay off the original loan, leaving the homeowner with an easier monthly load. When a property is being refinanced, it is the chance for people to be added or removed from the mortgage and title.
On the bright side, moving forward with this daunting process is less complicated than purchasing the home originally. A typical refinancing takes one month to 45 days. The first step is to choose what route is right for your property. There are many different refinancing options such as cash in/out refinances, a rate-and-term refinance, a short refinance, etc., and it is important to thoroughly research each type to understand the unique terms and conditions.
To apply for a mortgage refinancing you’ll need two recent pay stubs, bank statements, and W-2s. Similarly to purchasing a home, a lender will look at income, assets, debt-to-income ratio, and credit score to determine if a person is the right candidate.
After getting approved by your lender, it is a good idea to lock in your interest rate as early as possible so that it does not change by the time the loan closes. You’ll be given the option to ‘float your rate,’ meaning that the interest rate is not locked in before the loan officially closes. This option is a risk game for borrowers, as your rate will fluctuate with the market until it finally closes and you’re locked in. Choosing this route leaves borrowers subject to lower or higher rates than those they were offered at the time of applying. The risk is up to the homeowner.
Next, an underwriting process will occur just like the one conducted at the original purchase of the home. Financial information will be verified and a value appraisal will be conducted on the property. It is generally advised to put together a list of all the improvements made so that the appraisal can be adjusted quickly and efficiently.
Once there is a completed appraisal, your lender will reach out with your final closing disclosure and you’ll be able to see the final numbers and move forward with finalizing your new loan. There is a right to recession with a 3-day grace period so that homeowners still have time to back out even after the refinancing is complete.