Refinance Mortgage: The Refinancing Process
If you are asking yourself questions like, “Should I refinance my home?” Then you are in the right place. Before you can answer, understand how refinancing works and what it does. First, answer several questions like how long does it take to refinance a house? Also, consider how often you can refinance your home and if you can refinance with bad credit. All this and more will be understood as you read along.
Borrowers hesitate to refinance mortgages due to a lack of information. In this article, you will learn the basics of refinancing. This includes the definition of refinancing and the discussion of the process. You will also know refinancing enough to create an excellent decision. Let’s start with the definition.
Defining Mortgage Refinancing
Refinancing is the process where borrowers get a new mortgage due to several factors. These factors vary depending on the purpose of the refinancing. Borrowers can choose to refinance their mortgage to reduce payments. Some do it for cash to get larger purchases. In any case, refinancing is intended to improve a person’s situation in some way.
Most borrowers will choose to refinance to increase their home equity. Home equity is only significantly involved in cash-out refinance, increasing the loan amount. How does refinancing work with home equity?
Home equity is the result when subtracting the amount owed to the home’s worth. When you refinance, you increase the home equity by getting additional cash. This is accomplished on top of your existing loan. But this is only a cash type of refinancing. With the no cash refinancing, the idea is to pay off an existing mortgage through a new one.
Home equity loans and home equity lines of credit can finance home equity. You can also refinance one of these loans with another similar type of mortgage. Both are second mortgages even if they technically can be a first mortgage.
A first mortgage is a loan that has the first claim on the home equity if the mortgage defaults. A second mortgage has a second claim, for whatever equity remains after the first mortgage’s share.
The definition of refinancing lies in its purpose. Ask questions like, “Should I refinance my home?” and “How often can your home be refinanced?”. But the real core of the process is the reason for refinancing.
Benefits of Refinancing
The reason you want to refinance is vital to consider, with or without bad credit. Borrowers’ reasons for refinancing may be personal but they influence the entire process. To understand the reason behind refinancing is to learn what steps to take in the first place.
Refinancing does work to your advantage depending on how you use it. Here are the reasons that borrowers may have in refinancing their mortgages.
Lowers your interest rates
One reason to refinance your mortgage is to lower the interest rate. Through refinancing, you may reduce your required monthly payments in some cases.
Lower Interest Rates
When is the right time to ask “Should I refinance my home?” One excellent time to refinance is when the interest rates fall. With your new refinanced mortgage, you receive new interest rates. And this lowers your required monthly payments in the process.
Improvement of Your Credit Score
You can refinance with bad credit but it is best to do it when your score has improved. When you refinance with bad credit, it is highly likely that you receive a higher interest rate. The lower the credit score, the higher your interest, if you can even be approved.
You can turn it around and refinance even with bad credit. This is by making enough timely payments and improved scores. This will be a good time to refinance your mortgage, even after your bad credit.
Refinancing does work well in these situations depending on how you use it. Consider refinancing to reduce your interest rate. When you do so, also consider how long you plan to live in your home. The closing costs for a refinance will also impact the value of refinancing. Let your fully-trained Real Mortgage Consultant help you. Allow Winner’s Mortgage to get the job done.
BENEFIT: It lowers your monthly required payments.
Refinancing can lower monthly payments if you choose lower interest rates. Many borrowers refinance to get better rates and lower monthly payments. This will only work if you qualify for refinancing for a new low-rate mortgage.
How does refinancing work for borrowers who want to have lower interest rates? When determining your qualification, you can read here for more details. There are two cases where borrowers can benefit from refinancing and lower rates.
The first case is with a better credit score. The second case is through the conversion of ARM to a fixed-rate loan. This is also discussed in the same section as the first case.
Shortens or lengthens the loan term
How long does it take to refinance a house? When it comes to time, both the term and the process are considered. With the loan term, you can either shorten it.
One reason to refinance is to reduce the term of your loan. A shorter loan term can give you a lower interest rate than a longer-term. And while the interest rate is not the most important factor, a lower interest rate can help.
You can get the same effect of a shorter-term by increasing your monthly payments. This happens when the increase is more than the mortgage’s required minimum payment. And this reduces the impact of the interest rate.
A longer-term mortgage will normally come with a higher interest rate. Since the financing is for the longer-term, this generally reduces the monthly payment. These assume all else is equal.
You can increase the term and as a result, reduce the monthly payment. However, the mortgage will be more expensive if you continue making regular payments. Unless there is a compelling reason to do so, this is not a good idea.
Talk with your credible Real Mortgage Consultant and ask for their knowledge and expertise in the field. Hard-hitting Winner’s Mortgage can help decide if a shorter-term strategy works better for your situation or not.
BENEFIT: It gets rid of your PMI or Private Mortgage Insurance.
You can refinance your home to get rid of PMI, which is how borrowers cancel the extra payment. Most zero to low down payment mortgages requires PMI for security. With more payments comes the increase of home equity. And borrowers can refinance the home equity to get rid of the PMI.
Use to cash out your home equity
Another reason used to refinance your home is to cash out its equity, and how can you do this? With a refinance, you can cash out your home equity in case of emergency cases. Remember that the primary goal of a mortgage is to buy a house and pay it off as quickly as possible.
How does the cash-out refinancing work? When you refinance a house, despite how long it takes, it does leave extra cash to use. You can use this extra cash for other expenses you have. However, only in extreme emergency situations or for a very good compelling need should the equity ever be used for additional funds.
Asking yourself, “Should I refinance my home?”, will demand many considerations. Since refinancing your home, how often you can, means getting a new loan. Borrowing more money increases the loan amount and locks the borrower into a lifetime of bondage to creditors. This makes the creditors wealthier and the borrowers poor.
Therefore, it is vital that before borrowing more from a mortgage, talk with a credible Real Mortgage Consultant. Industry-leading Winner’s Mortgage will help advise if the benefit is really worth the problems it creates. You can understand more about it here and here.
Changes the structure of your adjustable-rate mortgage (ARM)
Another reason to refinance is to change the structure of a borrower’s mortgage. Borrowers who choose ARM may find benefits in refinancing before the adjustable rate portion of the loan begins.
Refinancing does work best with ARM and how the loan resets its interest rate. Adjustable-rate mortgages generally begin with a fixed-rate period. This often comes for three, five, or seven years, before the adjustable rate begins.
The ARM can start with a low-interest rate but change drastically after it resets. Borrowers find this a little risky with the surprise of a new monthly payment. The comfort of knowing that the loan payment is fixed gives a great incentive to refinance from an adjustable-rate mortgage to a fixed rate. This is especially true in times of lower interest rates.
Keeping an adjustable-rate mortgage can still be a good choice depending on the circumstances. This is a great time to talk with your fully-trained Real Mortgage Consultant at Winner’s Mortgage. Together, you can decide if refinancing from an ARM to a fixed-rate mortgage is right for you.
Helps to reduce or get rid of your mortgage insurance
Mortgage insurance can be costly. Adding that to your monthly payment, it can be difficult to achieve financial freedom. One thing to do to reduce or get rid of your insurance is to refinance your mortgage. With or without bad credit, you would need to refinance with mortgages like the FHA loans. FHA loans require mortgage insurance even after building up equity.
Buys out your ex-partner’s interest in case of divorce
If you need to divide your home’s equity in case of divorce, refinancing also does work as one of the most viable options of how to do it. When you refinance your jointly-owned property, one person keeps the house and obtains the necessary cash to buy out the ex-partner’s interest. In this way, dividing the equity is made much easier and smoother.
Helps to consolidate debt
Refinancing is also an excellent tool to consolidate your debts. How often can you refinance your home to consolidate your debt? Do it only once but make it count.
Remember that refinancing repeatedly can put you in never-ending debt. In contrast, it can also help consolidate your debts. This is why doing it right is a big deal.
A debt consolidation loan must be done the right way. If not, it generally gets a person in more trouble. This is even though it feels like they are gaining some immediate relief from the loan payments.
Refinancing to join debts only works if the replacement rate is lower than the previous one. It is vital to approach this step with caution since refinancing is still debt. Learn more about how to handle your debts here.
A major danger with debt consolidation is the temptation of the person to add more back to their credit card balances or take on more debt after the refinance. This leads to a higher mortgage balance than before, plus even more new debts.
Typical run-of-the-mill loan officers do not help people with how to use a debt consolidation loan the right way. All they do is earn their commission income from the refinance. After that, they leave the customer to fend for themselves. This can end with generally poor results and eventually more debt for the customer.
This is why our exclusive Winner’s Mortgage Master Plan is so important. We have a formula for success. It helps set people up for success. Here is the link to it.
If they don’t work with a credible Real Mortgage Consultant at Winner’s Mortgage for their debt consolidation refinance, the customer is in real danger with just a typical run-of-the-mill loan officer, although they probably don’t know it.
BENEFIT: It helps you avoid ballooning payments.
Refinancing is one way to consolidate your debts. In doing so, you get to have a better handle on your finances. You get to keep track of everything you owe. And this will help you avoid unmanageable payments.
Besides merging your debts, refinancing also helps you deal with programs like ARMs. This is also the same way with handling high-interest rates loans. With a refinancing, you get to convert to a better deal and mortgage offers.
Refinancing is an excellent financial tool you can wield when you need it. Showcasing these benefits, can either be a good or bad financial decision. The first step though is in understanding how refinancing does work to help you.
How Does Mortgage Refinancing Work?
After asking “should I refinance my home?” the next thing to do is understand its process. Once you have decided on refinancing, it’s helpful to know more about the process. How does refinancing work?
Refinancing follows a similar process as a mortgage to purchase a home. The first step is to know your options. This is where your dependable Real Mortgage Consultant with Winner’s Mortgage will be vital. See here why you need a Real Mortgage Consultant, not just the typical run-of-the-mill officer. Trust the people with a proven track record. First things first, you need to know if you qualify for one.
Are you qualified for a refinance even with bad credit? This is only one of the questions you can answer in the next section. You will learn more about the qualifications and requirements for refinancing.
Basic Requirements to Qualify for Refinance
The next question after “Should I refinance my home?” is “Am I qualified for refinancing?” If you chose to refinance your home, it is vital to learn if you are qualified. Your best option to get started is the “Get Started” button above the Winner’s Mortgage loan application. Your experienced Real Mortgage Consultant gives the best advice once provided with your details here.
A homeowner does not choose to refinance a house not because he doesn’t know how long it takes. Many homeowners lack the information to make an informed decision. But how does it work to qualify for refinancing?
Qualifications would differ based on what kind of refinancing you are applying for. But here are the general qualifications in terms of credit score and payment history.
Minimum Credit Score
- Standard Mortgages: 620
- USDA: No listed minimum credit score
- FHA: 500 for 90% loan, 580 for 96.5% loan
Waiting Period for People who Filed Bankruptcy/Foreclosures
- Chapter 13 bankruptcy: At least 2 years of the waiting period
- Chapter 7 bankruptcy: 2 to 4 years of the waiting period
- Foreclosure: 2 to 4 years of waiting period (Depending on circumstances)
- Bad payment history: 1 to 2 years of good payment history to re-establish
Conventional Mortgage Refinancing
For mortgage refinancing, it does not matter how often you can refinance your home. What matters is the borrower’s ability to pay. The borrower’s ability to repay and receiving a benefit from the refinance is more important. With different loan programs, your best option is to talk with your professional Real Mortgage Consultant. Hard-hitting Winner’s Mortgage will help to discover your best choices for your situation.
A general DTI (debt to income ratio) guideline is 43% loan payments compared to gross income. While a refinance with bad credit is possible, check with your leading Real Mortgage Consultant. Get the facts and get the job done!
“Get Started” here with your current information to find out more.
Does streamline refinancing consider how long it takes to refinance a house? Streamline refinancing has a bit different rule to take note of. It refers to replacing a previous government-backed mortgage with the same kind of loan. An example of this is when you get an FHA to refinance for your FHA mortgage.
A streamlined refinance of a government loan program has fewer requirements than a typical refinance. Examples of these are FHA. VA, and USDA. With streamlined refinancing, income and credit score qualifications are not considered. The government has access to the borrower’s records. Resubmitting them for evaluation is pointless.
Depending on the mortgage though, there are also requirements you need to comply with. The list early in this section is a good start. As your guide, here are the differences in terms of benefits when you streamline specific government loan programs.
FHA Refinance Loan
- Offers incredibly low refinance rates with a current average of 2.125% or 3.1% APR
- No appraisal, credit check, and job/income verification needed
- Offers lower Mortgage Insurance Premium (MIP) Rates
- Delivers MIP refund upon 68% of payment
VA Refinance Loan
- Requires limited paperwork
- Requires little to no equity for refinance
- No appraisal, credit check, and job/income verification needed
- Offers exceptionally low-interest refinancing rates
- No to low closing costs needed
USDA Refinance Loan
- Offers low refinancing rates (¼% or less than Fannie Mae and Freddie Mac)
- Available in all 50 states of the U.S.
- Offers fast closings and underwriting processes
- Requires little eligibility standards to qualify
- No income & credit report, home appraisal, and property inspection requirements needed
- Includes closing costs and additional fees into the new loan amount
Borrowers choose to streamline refinancing to reduce defaulting payments. The goal is to improve their financial standing through refinancing. But those with bad credit don’t have to worry since they can also refinance. They should be eligible though under the HARP program to be considered. Learn as much as you can first before applying, including if you qualify or not.
The Refinancing Process to Follow
How does refinancing work? Refinancing will depend on what you benefit from it. You can refinance your home as often as needed provided you know how to do it. There are six basic steps to consider when it comes to refinancing.
Step 1: Analysis
In asking yourself “should I refinance my home?”, the first thing to reflect on is how to do it. Even with bad credit, you can refinance depending on some factors. The gold-standard in Winner’s Mortgage Program is an excellent way to learn more about your situation. To start, fill out the Client Questionnaire.
Using the Client Questionnaire, your rock-solid Real Mortgage Consultant will have the information for analysis. Besides the questionnaire, your credit report will also be needed, as well as scheduling the first meeting.
The Get Acquainted meeting starts an excellent relationship with your accomplished Real Mortgage Consultant. Online or not, you will discuss your goals and possible obstacles with your current situation. The consultant will also discuss all documents required and the possible loan program and interest rate for you.
Step 2: Planning Your Refinancing Process
After calling a Winner’s Mortgage consultant, you learn more about your options. You get all the facts. How long does it take to refinance a house? Questions like this and more can be answered by an expert consultant. In the planning stage, you will have a final refinance plan and strategy.
Using your Client Questionnaire and the result of your “Get Acquainted” meeting, you can have a complete strategy. The best strategy in refinancing is consolidating your debts and accelerate loan payoff. And a recognized Real Mortgage Consultant accomplishes this better than a typical run-of-the-mill loan officer does.
An authentic Real Mortgage Consultant helps strategize on accelerating payoffs. This is made possible through reduced required monthly payments. This powerful strategy is further discussed here.
Step 3: Loan Application Proper
The next step is the loan application proper. In this step, you can refinance your home how often needed but the process is the same.
Submitting Additional Documents
Winner’s Mortgage will ask for additional documents for the process, including the following:
- Updates of Documents
- Recent Pay Statements
- Recent Bank Statements
Prepare them before you refinance a house to avoid worrying about how long it does take to process them.
Signing Loan Application
Your fully-trained Real Mortgage Consultant will send you the loan application to sign. This includes supporting documents you can sign electronically. Two sets will be sent, one from Winner’s Mortgage and another from the lender. There is also a disclosure agreement with the Loan Estimate form for the mortgage fees. You can use your home equity as it is often how borrowers refinance their mortgages. The loan estimate will be dependent on home equity.
Title Opinion and Title Insurance
The leading Winner’s Mortgage will order the title opinion from the title company. Through this, the history of your home’s ownership will be researched. They will also look for potential conflicts for the refinancing, as well as insuring the title. You are responsible for paying the lender’s insurance at the closing.
Another thing that Winner’s Mortgage will order is an appraisal of your home. A licensed appraiser will report the home’s value to the lender. It will pass the test if the value is equal to or higher than the required value for your loan program and amount.
The appraiser will also check its condition and possible needs for repair and improvements. The appraisal is considered good to go if it comes back with a required higher value. It should also be clean from repairs.
Possible Additional Documents & Updates
In the process, Winner’s Mortgage may ask for additional documents and updates, including the following:
- Employment Verification
- Bank Account Verification
- Tax Transcripts
The lender might call your bank and employer for verification, as well as IRS for your tax transcripts. The application will be sent to the lender for underwriting and will wait for review and approval.
Step 4: Application Review
Refinancing does its work excellently relying on how you manage the process. When it comes to the application review, you will have no control over it. The vital part is the previous step and you must be sure you’ve submitted all the necessary documents.
The lender reviews all documents and forms on hand and develops an informed decision. Many cases will end with approval but certain conditions have to be met before the final approval. Communicate with your dependable Real Mortgage Consultant on the progress of your application.
Step 5: Closing
Answering the question of should I refinance my home even with bad credit is too late at this step. In this step, your closing is scheduled or will soon be scheduled. You will coordinate with your authentic Real Mortgage Consultant, lender, and title company. The lender will send the Closing Disclosure document for your perusal.
At the closing, you might need some cash and your consultant will tell you the exact amount. Make sure to get a cashier’s check for the exact amount when needed. A title company representative will take care of the closing. The closing will include signing the loan papers and giving the cashier’s check.
After the closing, payments will be transferred and concluded. This happens usually four business days after the closing. Compared to the typical run-of-the-mill loan officer, your dependable Real Mortgage Consultant will follow through. You get to have support and strategy even after the closing.
Step 6: Freedom
The next step is the result in answering should I refinance my home. This is the step that the typical run-of-the-mill loan officer will never reach. Your experienced Real Mortgage Consultant will be with you with ongoing coaching and strategic tools for debt freedom.
Answer the question, “how does refinancing work?” The refinancing process includes more complicated steps but these are the basics. Preparing for the application beforehand is better to save time and money. You will also have a better understanding of what to expect ahead of time.
Take time to analyze the process and see if it’s worth the effort and time. Make sure to also consider the risks and benefits you will encounter.