Home Mortgages and Refinances

When you work with our team, the process for your mortgage refinancing is straightforward. Once your application is accepted, the loan’s rate can be locked in. A home appraisal and title work is completed, and any applicable credit documents are updated. You will then get homeowners insurance, and all documents are submitted for review. Once everything is approved, a closing date is set—and your loan is completed.

Most types of home loans can be refinanced, but there are factors that can make refinancing difficult, such as owing more on the loan than the house is currently worth.

There are four factors (the four “Cs”) a lender considers when approving loans:

• Credit history—Do you have a history of making your payments on time? 
• Cash—How much down payment do you intend to make?
• Capacity to pay—How easily can you make payments out of savings if needed?
• Collateral—Do you have enough equity in your real estate to cover the loan?
  

To give yourself the best opportunity to obtain the financing you need, take steps such as:

• Pay debts on time for at least 12 months prior to applying for a loan
• Have multiple credit lines in good standing for at least 24 months
• Maintain the same job or jobs within the same field for at least two years
• Limits debts to no more than 40-45% of your pre-tax income (ideally less)
• Build an emergency fund that will cover at least 2-3 months or more of mortgage payments

Credit scores are an important factor in determining how easy it will be for you to refinance at a lower interest rate than the mortgage you currently have.

Lenders typically award the lowest interest rates to borrowers who have a credit score of 760 or higher. If your score is lower than that, you may still be eligible for a loan, but at a higher interest rate and fees.

In addition to your credit score, lenders also weigh factors such as:

• Length of credit history—A longer history of regular payments is best.
• Types of credit you have—A mix of several kinds (credit card, auto loan, etc.) is better.
• Outstanding debts—The lower, the better. It’s best to keep balances low.
• Payment history—Loans in good standing and consistent payments are important to getting the best loan rates.
• Inquiries—Frequent inquiries about your credit can affect loan applications negatively. If you’re applying for a mortgage or a refinance, you can limit inquiries by not opening new credit accounts for several months prior to applying for a home loan.

The answer to this question depends on your goals. You must weigh those goals against the best terms you can get, to ensure a good balance between them.

For borrowers who want monthly payments to be as low as possible, look for the longest term (length) of the loan that you can get.

If you desire to pay less interest over the life of the loan, look for a mortgage that gives you the lowest interest rate at the best length for what you can comfortably handle.

For those who would like to pay off the loan as quickly as possible, choose a refinance that has the shortest term, as long as you can reasonably afford the payments.

Keep in mind that a short term loan with a balloon payment may not be best for you, even if the interest rate is low.

Also, some loans can penalize you for early repayment, so be sure to ask about the repayment options before committing. 

You can refinance a conventional mortgage at any time, but you should weigh the pros and cons to be sure you’re getting a strong financial benefit for doing so—especially if you are planning to sell your property.

Keep in mind that a refinance means you are getting a new loan, which involves closing costs and other fees that you will want to recoup in savings on your mortgage payments before you choose to sell the property. This can take several months, depending on your specific situation.

The process is more complicated with government-backed loans (such as FHA loans). Such mortgages often require homeowners to live in their property for a specific length of time—a year or more—before selling. So, find out the specific terms of your mortgage before attempting to refinance.

When you get ready to apply for a loan, you will need:

• A copy of your driver’s license or state identification
• Prior two years of your W2 statements
• Last 30 days of pay stubs
• Past two months’ bank statements (all pages)
• If you are self-employed, your most recent tax returns (personal and corporate)
• Any documents that qualify you for special loans (VA, etc.)

The key is to keep your finances consistent and in good standing. Continue to pay existing loans until the refinancing is complete and old loans are paid off. Stick with your same employer, and maintain your same insurance policies. Don’t open new credit accounts or new bank accounts. Hold off on major purchases. 

If you have any additional questions about the refinancing process, let us know. Our team is here to help.