When it comes to refinancing a home loan, there are a number of things to consider before you even start getting quotes. It is best to stop before you start and create a list of reasons you have for wanting to refinance your home loan.
Once you do this, you will want to understand the home loan refinancing process completely. Luckily, we are here to help. Read on to learn everything you need to know about refinancing your home loan.
What Is Home Loan Refinancing?
Before you start getting quotes and calculating interest rates, you want to make sure you understand what refinancing a home loan actually means. Put simply, refinancing your loan means revising and replacing the terms of an existing loan.
Traditionally, refinancing is considered a good idea if you can reduce your current interest rate by two percent.
Not only can this reduced interest rate help you save money, but it can also help you build more equity into your home. In some cases, it can even cut your repayment period in half. It is also worth considering if you can switch from an adjustable to a fixed-rate loan.
Making that switch locks in your interest rate, promising consistency when it comes to payments.
How Can You Refinance Your Home?
This process is often a lot less complicated than the actual home buying process, but it can take the same steps. Typically, though, the entire process can take anywhere from 30 to 45 days. Here is what you can expect.
When you apply, the lender will ask for the same information you gave you when applying for your initial home loan. They look at everything from your income and debt to your assets and credit score to determine whether or not you qualify for refinancing.
Your lender is also going to look at your spouse’s documents and assets (only if you’re married). It is important to note that you might need more documents if you are self-employed, but you should talk to the lender you’re applying with before gathering all your documentation.
Another thing to consider is that you do not have to refinance with your current lender. In fact, it can be good to branch out to other lenders if that’s something you’ve been considering for one key reason: a better interest rate.
Locking in a Good Interest Rate
The more options you give yourself with potential lenders, the better your chance of finding a decent interest rate. Many things go into determining the interest rate you qualify for but finding a decent mortgage rate calculator or pre-qualifying for loans can be a great way to know what you can expect without taking hits on your credit score.
Once you have been approved, it is best to lock in the interest rate you are given if you have the option. On average, these rate locks can last anywhere from 15 to 60 days, so it is essential to not only lock it in but make sure you are ready to commit to it once you have it secured.
Once you have found a loan, you like with a decent interest rate, your loan moves to underwriting. This means your lender begins to verify your financial information and ensures that everything you’ve submitted is accurate.
After all financial details have been verified, your lender will verify your property details, which includes a property appraisal.
It is essential not to skip this step because it allows you to know all of your options.
This home appraisal process is precisely the same as when you first purchased your home. The lender is going to order your appraisal. Then an appraiser is going to visit your property to determine its worth. Beforehand, however, it is essential to prepare.
You can take a few simple steps to prepare for a property appraisal, like ensuring everything is neat and tidy and taking a few steps to enhance your home’s curb appeal. Make any repairs inside and out.Be sure to put together a list of improvements you’ve made to the home since purchasing.
It is vital to remind the appraiser of any major upgrades you made, like installing a new roof or HVAC unit or remodeling the kitchen or bathrooms in your home.
If you’re planning on making more upgrades and you’re not satisfied with the number the appraiser comes back with, you can always cancel your application and try again once you’ve made other improvements.
Closing on the New Loan
If you’re happy with your home’s value, however, and everything else has been approved, it’s time to move to close on your loan. Your lender is going to send you a closing disclosure with all the final numbers on your loan.
Be sure to look over this document before signing! Once you have done that and everything looks good, you’ll move to close with everyone listed on the loan and title, as well as a representative from the lender.
At closing, you’ll pay any closing costs not rolled into your loan, and your lender will pay you any money they might owe you. Once you have closed, you’ll have a grace period to make sure you are set to refinance and cancel if anything comes up.
Ready to Refinance Your Home?
When you’re ready to refinance your home loan, it can feel wrong to wait, but sometimes doing so can guarantee you the best results possible. There are a lot of factors to consider when it comes to refinancing your home, and you want to make sure you’re biting the bullet on an option that isn’t going to pay off in the long run.
If you are ready to get started with refinancing your home loan,contact us today.
At 7th Level Mortgage, we are an experienced team of mortgage professionals based out of New Jersey and serving the east coast from Pennsylvania to Florida, including Delaware and Maryland. We have won numerous awards for our excellent professional work and reputation with clients for being extremely diligent, accessible, and hands-on throughout the entire mortgage process.