What You Should Know Before refinance mortgage is
Replacing the original mortgage to get a new home mortgage to is called refinancing. Refinancing is a choice that might make a borrower to get a different and better interest term and rate. When the first home loan is paid already, the second loan will be recreated with making a new mortgage instead and then throwing the original mortgage away.
If borrowers have a good credit history, their refinancing can be a better way than before.
For example, Their interests can convert a variable loan rate to a fixed interest and also can get a lower interest rate. But if borrowers have bad credit or still have too much debt to go, refinancing mortgage will be risky for them.
In any economic situation for both high interest rates and an unstable economy, it might be quite difficult to make payment on a home mortgage and might be tougher than you expected.
And right now do you think that you find yourself in this situation??
So it might be your time to consider refinancing mortgage.First of all of the refinancing is the danger in refinancing lies in ignorance. If you don’t know exactly about refinancing, it can hurt you with increasing your interest rate rather than lowering it!
Therefore, for example, you should know at least the basic knowledge like comparing current rates of each lenders or banks in your area.
What Is The Definition of Refinancing?
Refinancing is the process of getting a new mortgage loan for reducing monthly payments from having lower interest rates, taking cash out of your home for large purchases or changing mortgage company. Most people refinance mortgage when they have equity on their homes, which is the difference between the amount owed to the mortgage company and the worth of the home.
4 things to plan for mortgage refinance
1. Know who will be involved for mortgage refinance
Although there are many professionals for mortgage refinance like real estate appraisers and mortgage underwriters those will come to work as important roles, your primary contact will be your lender for any type of refinance. You will have to work firstly with your lender via the mortgage refinance process. On the other hand, your lender will work with a team who will be involved in your transaction of mortgage refinancing. Although you will not meet all of the related persons, it is quite important that you should know their roles of mortgage refinancing.
Lender or Loan officer who is the person that will evaluate your credit, financial, and employment information to see if you qualify for a refinance. When they complete their evaluation, they will provide you with financing options and also help you until your mortgage application completed. They will keep track of its status during the loan approval process.
Loan processor who is the person that will prepare your mortgage loan information and application for presenting to the mortgage underwriter. They will make sure that you have included all proper documentation, all numbers are calculated accurately, and everything is in order to ensure a timely decision on your approval.
Mortgage underwriter who is the person that will assess your eligibility for the loan based on your credit history, employment history, assets, debts, and other factors.
Real estate appraiser who is the person that will analyze and evaluate unbiasedly your home and property to determine the value of the real property. They will provide assistance to those who own, manage, sell, invest in and lend money on the security of real estate.
Closing representatives who is the one that will oversee and coordinate the closing or “settlement” of your loan, record the closing documents, and pay the money to the appropriate individuals and organizations.
All of these people have different roles but important in your mortgage refinancing. Lean on them, ask questions, and remember that they are working for you.
(reference : zillow.com)
2. Gather your personal document for mortgage refinance
When you meet your lender to apply for a mortgage refinance, you will need to provide your personal information, like just as you did for your home purchasing. These documents will allow your lender to decide your eligibility, including your W-2s, bank statements, and tax return.
The process of refinancing mortgage is very similar to the home buying process. You’re creating a new loan with new terms or even new lender (whether you’re using your original lender or a new lender). The process will require the same document and information you provided when you originally purchased your home.
The below following document is what you have to provide to the lender:
• W-2s from the past year, perhaps two
• Pay check stubs from the past one to three months
• Proof of any supplemental income
• Tax documents from the past two years, including all pages and schedules
• If you are self-employed, it’s likely you’ll have to submit a current-year profit-and-loss-statement, among other documentation
• Checking and savings bank statements from the past one to three months
• Investment account statements – including 401(k), stocks, IRA and mutual funds – from the past one to three months
• Statements for all debts, including car loans, student loans, credit cards and your current mortgage
• Copy of your driver’s license
Remark : the duration of documentation may differ from lender to lender
If you’re divorced, you need to provide a copy of your divorce decree along with associated alimony or child support documentation.
3. Understanding the Documents Involved
When you purchased your home, you reviewed and signed many documents prior to and at closing. When you refinance your mortgage, you will be required to do the same as this is a new loan with new rates and terms. Take some time to review these documents again and refresh your knowledge.
Forms You’ll See Prior to Closing
Uniform Residential Loan Application: This is the same mortgage loan application you completed when you purchased your home, capturing key information about you, your finances, and details of your potential mortgage. With this form, you’ll be required to provide information about your monthly income, combined household expenses, assets and liabilities, and personal information such as your social security number and marital status. This information will help your lender assess your eligibility for a new loan.
Good Faith Estimate: Within three business days of submitting your completed loan application, your lender must provide you with a Good Faith Estimate (GFE) that outlines your loan terms, escrow account information, and all estimated costs associated with new your loan that will be due at closing.
Truth in Lending Disclosure Statement: Within three business days after completing your mortgage application, your lender will send you a Truth in Lending Disclosure statement. This disclosure includes the total amount being financed, your finance charge, your Annual Percentage Rate (including interest rate, points, broker fee, and other costs), and your payment schedule. Your lender will give you an updated version of your Truth in Lending disclosure at closing.
In late 2015, lenders will begin using a new Loan Estimate Form that combines information currently in the GFE and the Truth In Lending disclosure
The Most Important Forms You’ll Sign at Closing
HUD-1 Settlement Statement: This key document provides all of the actual fees, costs and credits associated with closing your loan. You have the right to receive the HUD-1 settlement statement for review 24 hours before your closing. It is important to review the HUD-1 carefully to ensure that you are signing up for the loan you agreed to. On page three of the HUD-1, you’ll find a table that allows you to quickly and easily compare the estimates from your GFE to the actual costs.
The Promissory Note: This is the legal document you sign agreeing to repay the loan according to the terms to which you agreed. It outlines the details of the loan, the dates when payments are to be made and where payments are to be sent. It also explains what can happen if you fail to make a payment on time.
Deed of Trust: By signing this document, you are giving the lender the right to take back the property by foreclosure should you fail to repay your loan as agreed. This document also explains your rights and responsibilities as a borrower.
Deed of Trust: The seller will sign the deed to transfer ownership over to you, and it will have the names of all the buyers on it. Your title will be held with a third-party trustee until you have paid for the house in full. You will receive a copy of the deed at closing.
Affidavits and Declarations: These are statements declaring all the information you provided is true, including that the property will be your primary residence and all repairs needed on the property were made prior to closing.
4. Determining the Costs
Refinancing your mortgage can save you hundreds of dollars per month, but before you dive in, it’s important that you’re aware of all associated costs. You’ll want to work closely with your lender to do a cost-benefit analysis and determine whether refinancing makes financial sense for you.
What You Should Know Before Refinance mortgage is
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