Refinancing Mortgage - A Complete Guide
In order to help them make this determination, it is important to understand what mortgage refinance is and what are the steps involved in the process. Accordingly, you can decide whether or not it is the right choice for you.
What is Mortgage Refinance?
Mortgage refinance, simply put refinances your current home loan with a new one. People often refinance to reduce the interest rates, tap into their home’s equity or even cut their monthly payments. Some people also refinance to pay off their loans faster and clear out their FHA loans Texas and switch to a fixed-rate loan from an adjustable rate.
How to Refinance your Mortgage?
Refinancing a mortgage should not be a haste decision. It should be considered after weighing the pros and cons, determining your goals, and then taking the necessary steps towards lowering the payment or cash out in order to achieve your financial goals.
Set up a goal for your mortgage refinance:
Before proceeding to refinance, you must set a goal for starting the new mortgage. It is important to know whether you are interested in saving some money in your monthly payments. Or you feel like taking out cash to consolidate debt or fund a big project. Once you have a clear-cut goal set, you can then proceed forward with a mortgage refinance.
Check your credit score:
Just like any other transaction involved in credit, you must know what your credit score is before you talk to lenders. By checking your credit report you can get a fair idea of how the lenders perceive your risk. This will also allow you to fix any erroneous information before requesting dates. While there are options available to refinance with bad credit, but you may not get the best rates.
Shop for a mortgage refinance with Texas Mortgage Lenders:
Once you have understood your credit score, you can shop for a mortgage refinance rates with mortgage lenders in Texas and see what best options are available for you. You can request multiple quotes from the lenders within the first 2 weeks of your request without impacting your credit negatively. If you qualify for VA mortgage refinance, you can work with mortgage lenders who will help you explore these options.
Select your lender and lock your refinance rate:
Once you feel satisfied that you have found the best option, you can lock your rate with the lender. However, you must lock it as soon as you have made the decision because mortgage rates keep changing daily. Every day that you don’t lock the rate could mean a higher rate. Some lenders may allow you to float down if the interest rates are lower after you close, but that can come with an additional fee.
Prepare to close your refinanced loan:
After locking, your lender will start with the closing process. Just like you go through all the paperwork when buying a house, you will have to do the same including income verification and submitting tax return information. Based on the specifics of your refinance, you also will have to have the house appraised and that can cost around $400.
Attend the closing of mortgage refinance:
The final step involves you signing the closing paperwork and taking advantage of this refinance. Like the first closing, the lender will inform you where you must go and what you will have to provide. You must be prepared with a government-issued photo ID and the cash required to close. Another option is to wire transfer the cash to the bank beforehand.
What are the Costs of Refinancing?
Costs of refinancing depend based on the lender and they tend to add up quickly. Below are some of the common examples of the expenses involved in refinancing -
Mortgage application fee:
This application fee is charged by the lenders to cover the loan processing and credit check.
Loan origination fee:
This fee is charged by the lender for evaluating and preparing your loan and includes it as underwriting and funding. It is included in the loan amount and avoids any upfront or out of the pocket costs. You can expect to pay around 1 to 1.5% of the principal balance to pay for those charges.
Appraisal fee:
An appraisal fee is a service that helps in estimating the value of your home. It is a very important step in the mortgage process that helps in determining the loan amount. The fees here are charged by the Appraisal Management Company or AMC and not by the lender. To pay these appraisal fees, almost 90% of the lenders require their borrowers to make a one-time and upfront check or online payment. This will protect the lender from borrowers who start the process, complete the appraisals and later change their mind or fail to qualify for the loan.
Title search and title insurance:
This search charge covers the cost of examining the public records to research the home deed and ensure that no one else has a claim on that property. Title insurance also provides protection to the homeowner in case anyone sues and says that they have a claim against the home before the homebuyer bought it.
Mortgage Insurance
Based on the loan program and the down payment amount, you may be required to pay mortgage insurance. This protects the lender in the event when you default on your mortgage.
A homeowner must plan on paying an average of 3 to 6% of their outstanding principal in the refinancing costs and also any prepayment penalties or the costs of paying off second mortgages that may exist. But, the lender is always on your side. They will help you make informed decisions on the solutions that will fit the best for your financial needs.
Comments
Post a Comment