Refinancing

Refinancing is the process of replacing your current mortgage with a new loan offering better terms.

The reasons behind refinancing and the ways it can benefit home-owners are varied.

  • Get a lower interest rate
  • Shorten the term of a mortgage
  • Consolidate debt
  • Switch to or from adjustable and fixed rate mortgages
  • Use home equity for other large expenses
  • During a divorce to remove a spouse from the mortgage
  • Change mortgage companies

It’s important to carefully analyze these financial choices before making this decision, and one of our mortgage professionals can take you through all scenarios based on your situation. That’s why your very first step for a home refinance is to contact us and find out what your options are.

The steps are similar to a home loan purchase:

  • Gather all your financial documents for the application (bank statements, pay-stubs, tax documents, etc.)
  • Our processor will request documents from you such as title reports, proof of property insurance, credit insurance, income, etc.
  • Prepare your home for the appraisal (clean is always good for a first impression) – appraisal may or may not be needed.
  • Things have changed slightly and Underwriters may require more documentation. Even if their requests seem silly to you, if they didn’t need it, they wouldn’t ask for it. The Underwriter is held responsible for the decision made on a loan, and they have a checklist of information to verify.
  • After approval, you are clear to close and will receive a closing package and we can schedule the closing.

Understand that every situation is unique. Lenders must take steps to satisfy guidelines that were meant to protect you and others involved.

As our client, we are available to you for any questions that may come up. During a refinance with us, you receive helpful emails and videos explaining where you are in the process.

Locking In Your Interest Rate

Once you get approved, you may be eligible to lock in an interest rate. You would want to do this so that it doesn’t change before the loan closes.

The period that a rate lock can occur is anywhere from 15 to 60 days. The factor that determines this period is location, lender and loan type. If you lock for a shorter duration than you may get a better rate. The reason for this is the lender will not have to hedge against the market for as long. A pitfall to be aware of – if the loan doesn’t close before the lock period is over, you could potentially have to extend the lock rate which will cost you money in the end.

Another option that could potentially come up is the option to float your rate. This means, not locking in before moving forward with the loan. This is tricky because it can have a negative or positive impact. You could actually get a lower rate with this feature but it oddly also puts you at risk of getting a higher rate.

A float-down option would give you the best of both worlds. If you’re happy with the rates you’re receiving that its best to lock it in.

Underwriting

Once you’ve gotten to this point and you have submitted your application, the next step is underwriting. Now all of your information will be verified. The information that gets verified is financial in nature. Basically, we want to make sure you’re legit and/or haven’t robbed banks and hopped trains all over the wild wild west. We will verify the details of the property, similarly like when your purchased your home. An appraisal will likely be in order during this step to determine the homes value. The refinance appraisal is a pivotal step in this process because it allows you to see the array of options that become available to you.

The value of your home will determine how much you are going to get back if your refinancing to receive cash. If you want to lower your mortgage payment, a factor in determining your home equity to do away with your (PMI) private mortgage insurance is the end value determined by the appraisal.

 

Home Appraisal

The steps are the same as when you first acquired your home, you must get an appraisal before you can refinance. The lender will arrange an appraiser to come visit the home or property and you receive an estimate of the value of your home.

To get ready for the appraisal, you’ll want to make sure your home s looking like its ready to go to prom for the first time. A fresh haircut (mow the lawn) even, you want everything looking spik and span. Complete any minor repairs and make sure you will leave a good impression. You may want to consider a list of upgrades you’ve made to the home in the time that you’ve owned it.

If you find that the home’s value is equal to or higher than the amount of the loan you want to finance, this indication shows the underwriting is complete. The lender should reach out with the closing steps to move forward.

What if my estimate comes back low? You will have the option to decrease the amount of money you want to receive through the refinance, alternatively you can cancel the application. Another option would be a cash-in refinance, bringing cash to the table allows you to get more favorable terms in your deal.

 


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Sierra Pacific Mortgage NMLS# 1788. Michael Shotnik NMLS: 218281, CO License: 100017466. Not licensed in Alaska or New York.  To check license status of mortgage loan originator, visit D.O.R.A. and NMLS consumer access.