How To Refinance Your Mortgage
Refinancing a mortgage means you get a new home loan to replace the old home loan. You don’t need to get the new loan with your current mortgage company. Instead, you should be focused on finding a mortgage lender who will find the right solution to meet your individual needs.
1. Set your financial goal. Reduce monthly payments? Shorten the loan term? Remove your FHA or Conventional mortgage insurance? Tap your home equity to pay for repairs or a renovation.
2. Check your credit score. The higher your credit score, the better refinance interest rates lenders will likely offer you. Go to AnnualCreditReport.com to get a copy of your credit report from Experian, TransUnion, and Equifax. It’s good to get in the habit of reviewing your credit reports each year to catch any reporting errors you can resolve to help boost your score.
3. Determine how much equity you have in your home. First, check your most recent mortgage statement to see how much you owe on the balance. Next, check online home search sites to compare your home with recent sales of comparable homes in your neighborhood to get an idea of your home’s current market value, or ask a real estate agent to run an analysis. Qualified homeowners can refinance a conventional loan with as little as 5% equity. However, if your equity is less than 20%, you’ll likely pay higher interest rates and loan fees, plus private mortgage insurance.
4. Shop for a competitive refinance rate. Refinancing your home loan can be a mistake if you aren’t able to significantly lower your interest rate. And remember, refinancing isn’t free. You’ll need to pay origination fees, an appraisal, title insurance, taxes, and other costs, just like the original mortgage did, so compare fees, too.
5. Gather your documentation. Just like when you purchased the property, your new mortgage lender will require proof you can repay your refinanced mortgage loan. Be prepared to provide recent pay stubs, W-2’s and/or the past 2 years of federal tax returns, bank statements, and anything else your lender requests. Your finances will also be reviewed, so start gathering documentation to disclose your assets and liabilities.
6. Choose a lender. To select the best lender for you, request a Loan Estimate or Cost Analysis Worksheet. Discuss the program, term, interest rate, the APR (the cost of borrowing) and the total closing costs and prepaid items you will either pay out of pocket or finance into the new mortgage.
7. Prepare for the appraisal. Your mortgage lender may require an appraisal to determine the home’s current market value. Let your loan officer know of any improvements or repairs you’ve done since buying your home that might add to its market value.
8. Connect your homeowners’ insurance carrier with your new lender. Your lender of choice will need your insurance provider to obtain an updated homeowners’ insurance (HOI) policy with a revised annual renewal based on your close date, the lender's mortgagee clause and coverage based on the loan amount.
9. Lock your rate. A good loan officer will notify you when interest rates are favorable, but you decide to decide when to lock your rate. Having all your documentation submitted and selecting a lender with a reputation for closing loans on time will help to ensure your loan closes before the rate lock expires.
10. Close on the loan. Closing day is when you’ll pay those closing costs that were listed in the Loan Estimate and confirmed in the Closing Disclosure. Closing on a refinance is like closing on a purchase loan, but with one main difference: No one hands you the house keys at the end. But you still get to pop the champagne for being a savvy homeowner!
Ready to refinance your mortgage? Contact a Certainty mortgage professional in your state to get started!
1. Set your financial goal. Reduce monthly payments? Shorten the loan term? Remove your FHA or Conventional mortgage insurance? Tap your home equity to pay for repairs or a renovation.
2. Check your credit score. The higher your credit score, the better refinance interest rates lenders will likely offer you. Go to AnnualCreditReport.com to get a copy of your credit report from Experian, TransUnion, and Equifax. It’s good to get in the habit of reviewing your credit reports each year to catch any reporting errors you can resolve to help boost your score.
3. Determine how much equity you have in your home. First, check your most recent mortgage statement to see how much you owe on the balance. Next, check online home search sites to compare your home with recent sales of comparable homes in your neighborhood to get an idea of your home’s current market value, or ask a real estate agent to run an analysis. Qualified homeowners can refinance a conventional loan with as little as 5% equity. However, if your equity is less than 20%, you’ll likely pay higher interest rates and loan fees, plus private mortgage insurance.
4. Shop for a competitive refinance rate. Refinancing your home loan can be a mistake if you aren’t able to significantly lower your interest rate. And remember, refinancing isn’t free. You’ll need to pay origination fees, an appraisal, title insurance, taxes, and other costs, just like the original mortgage did, so compare fees, too.
5. Gather your documentation. Just like when you purchased the property, your new mortgage lender will require proof you can repay your refinanced mortgage loan. Be prepared to provide recent pay stubs, W-2’s and/or the past 2 years of federal tax returns, bank statements, and anything else your lender requests. Your finances will also be reviewed, so start gathering documentation to disclose your assets and liabilities.
6. Choose a lender. To select the best lender for you, request a Loan Estimate or Cost Analysis Worksheet. Discuss the program, term, interest rate, the APR (the cost of borrowing) and the total closing costs and prepaid items you will either pay out of pocket or finance into the new mortgage.
7. Prepare for the appraisal. Your mortgage lender may require an appraisal to determine the home’s current market value. Let your loan officer know of any improvements or repairs you’ve done since buying your home that might add to its market value.
8. Connect your homeowners’ insurance carrier with your new lender. Your lender of choice will need your insurance provider to obtain an updated homeowners’ insurance (HOI) policy with a revised annual renewal based on your close date, the lender's mortgagee clause and coverage based on the loan amount.
9. Lock your rate. A good loan officer will notify you when interest rates are favorable, but you decide to decide when to lock your rate. Having all your documentation submitted and selecting a lender with a reputation for closing loans on time will help to ensure your loan closes before the rate lock expires.
10. Close on the loan. Closing day is when you’ll pay those closing costs that were listed in the Loan Estimate and confirmed in the Closing Disclosure. Closing on a refinance is like closing on a purchase loan, but with one main difference: No one hands you the house keys at the end. But you still get to pop the champagne for being a savvy homeowner!
Ready to refinance your mortgage? Contact a Certainty mortgage professional in your state to get started!