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. For example, 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.
Learn the basics of refinancing. This includes the definition of refinancing and the discussion of the process. Know refinancing well enough to make a wise decision.
Defining Mortgage Refinancing
Refinancing is the process where borrowers finance a new mortgage which pays off the existing mortgage. Borrowers can refinance for various possible reasons.
Borrowers can choose to refinance their mortgage to reduce payments, either with a lower interest rate or to consolidate debt. Some refinance for cash out to use for another purpose. In any case, customers intend refinancing to improve their situation in some way.
The definition of refinancing lies in its benefit. Ask questions like, “Should I refinance my home?” and “How often can your home be refinanced?”.
First, more information about home equity, then the potential benefits of refinancing when it is done correctly.
Home equity is the remaining value resulting from subtracting the amount owed on the property from the market value of the home.
When borrowers have sufficient home equity they can choose to refinance to take cash out of the equity. This increases the amount owed on the property and reduces the equity in the home.
Winner’s Mortgage cautions strongly against refinancing to take cash out of your home equity, except for very good, legitimate reasons. Sadly, too many people listen to typical run-of-the-mill loan officers and refinance for cash out for frivolous reasons. This is a certain way to lose with your mortgage and lose financially.
Instead, always consult with your Real Mortgage Consultant with Winner’s Mortgage before any refinance. Be sure you are refinancing for a good reason and for a reason that can help you to WIN with your mortgage and WIN financially, not lose like most people lose.
How does refinancing work with home equity?
When you refinance, you convert a portion of the home equity into cash. This replaces your existing loan with a new loan.
A second mortgage in the form of a fixed-rate home equity loan or an adjustable rate home equity line of credit can also convert home equity into cash.
Again – and this can’t be stressed too much – be sure to convert home equity into cash only for excellent, legitimate reasons. Consult with your Real Mortgage Consultant to be sure you are making a good decision and, if you proceed for a good reason, to do it right so you can still WIN.
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.
Refinancing does work to your advantage depending on how you use it. Use a refinance for the right reason and it can help you WIN financially. But use it for the wrong reason and you will lose.
As you consider these purposes below, consult with your Real Mortgage Consultant at Winner’s Mortgage so you can WIN.
Lower your interest rate
When is the right time to ask “Should I refinance my home?”
During a period of lower interest rates, you can receive an advantage to refinance to a lower interest rate. With the new reduced interest rate on the new mortgage loan, you can pay less on your mortgage. Even more importantly, this sets you up to WIN with your mortgage when you accelerate the payoff of that mortgage.
How does refinancing work for borrowers to get a lower interest rate and also WIN with their mortgage?
You can WIN by reducing the required monthly payment, then continue making the same payment on the new mortgage as you did on the previous mortgage. This means you pay more toward principal with each payment and reduce your total time to pay off the mortgage thereby saving even more interest due to the extra payments toward principal.
This can be accomplished without changing your monthly payment.
Shorten or lengthen the loan term
How long does it take to refinance a house? The process itself can go relatively quickly, but you will want to take longer to determine if the refinance is good for you. Be sure to get good advice and that will only come from your Real Mortgage Consultant, not from just any typical run-of-the-mill loan officer.
One of your considerations is that a refinance can shorten or lengthen the term of the loan.
A shorter loan term can give you the advantage of paying off the mortgage faster and saving interest. For example, refinancing from 30 years to 15 years could increase the monthly payment due to the shorter term. Shortening the term to a 15 year amortization could also reduce the interest rate. Although the interest rate is not the most important factor on a mortgage, a lower interest rate can be an added bonus.
It is important to note that you can get the same effect of a shorter term simply by increasing your monthly payments on your own. Refinancing simply to reduce a 30 year payoff to 15 years does not require a refinance. However, the impact of a lower rate to go with the refinance, even when you consider the costs of a refinance, could be worth it.
Therefore, you need good advice to make the right decision. Take advantage of the advice of your Real Mortgage Consultant who wants what is best for you even if it means not getting paid for doing the loan. Your Real Mortgage Consultant will only want to do the refinance for you if it is truly in your best interest. See here why you need to work only with a Real Mortgage Consultant – never with just any typical run-of-the-mill loan officer who wants to do the refinance to get paid whether or not it is best for you.
Alternatively, some people might choose to refinance to a longer term mortgage to reduce the required payment. This is rarely a good idea and should only be done if there are strong compelling reasons. The longer term will likely come with a higher interest rate, plus paying the costs of refinancing. All else being equal, the longer term will reduce the required monthly payment, but long term the cost will be higher.
This is a sure way to lose with your mortgage, therefore it is not recommended by Winner’s Mortgage without some strong compelling reason that makes it essential.
Consult with your credible Real Mortgage Consultant and take advantage of their knowledge and expertise to do what is truly best for you. The WINNING advice of Winner’s Mortgage can help you decide if refinancing to change the term of your mortgage is a good idea for you.
Remove Private Mortgage Insurance (PMI)
You can refinance your home to get rid of PMI, which is often how borrowers need to remove Private Mortgage Insurance. This is especially true with FHA loans, where it is called the Mortgage Insurance Premium (MIP) and cannot be removed except by refinancing the loan. With or without bad credit, it is necessary to refinance an FHA loan to remove MIP. FHA loans require the mortgage insurance premium regardless of how much equity you have in the property.
Alternatively, conventional loans will allow the removal of PMI under certain conditions when your loan balance is 75 to 80 percent of the home value, depending on the method chosen to remove PMI.
Refinancing a conventional loan will also remove PMI if the new loan balance is 80 percent or less than the appraised value. If there are other reasons to refinance, refinancing can be an effective PMI removal tool.
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?
How does cash-out refinancing work? When you refinance a house, knowing how long it takes, does give an advantage to plan. A cash out refinance can give you an advantage if it is used properly. Unfortunately, too often cash out refinances are too often used incorrectly.
Asking yourself, “Should I refinance my home?”, especially for cash out, requires serious consideration if you want to WIN with your mortgage. Since how often you can refinance your home for cash out is limited, if you are going to do it, be wise about refinancing for the right purpose.
Borrowing more money to get cash out increases the loan amount and locks you into a lifetime of bondage to creditors. This makes the creditors wealthier and you poorer. Too many cash out refinances are done by typical run-of-the-mill loan officers for dubious reasons, setting you up to lose with your mortgage instead of WIN.
Consult with your credible Real Mortgage Consultant if you are considering borrowing cash from your home equity with a new cash out refinance. Winner’s Mortgage will help you and advise if the benefit is really worth the risk it creates.
Change 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.
Adjustable-rate mortgages generally begin with a fixed-rate period. This often comes for three, five, or seven years, before the adjustable rate begins. Refinancing does work with an ARM, especially how to prevent the loan from adjusting its interest rate before the initial fixed rate period ends.
Once the ARM begins adjusting the rate, the initial low rate can begin to change drastically, and possibly so that it is not affordable. This is more risk than most borrowers can tolerate. 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.
In some situations, it can be an advantage to keep the adjustable rate mortgage. Use your Real Mortgage Consultant’s expertise to help you with the best decisions for you. Together you and Winner’s Mortgage can help you decide if refinancing from an ARM to a fixed rate mortgage is right for you. Making the right decisions is how you can WIN with your mortgage.
Buy out your ex-spouse’s interest in case of divorce
If you need to divide your home’s equity in case of divorce, refinancing is how to accomplish it. Normally, to refinance your jointly-owned property, one person keeps the house and refinances for the necessary cash to buy out the ex-spouse’s interest.
Refinancing is also an excellent tool to consolidate your debts, but only if you do it right. How often can you refinance your home to consolidate your debt? Do it only once and make it count.
Refinancing repeatedly to consolidate debt will put you in never-ending debt. Do it once, do it right, then do what you need to do after the refinance, then you can WIN. In contrast, do it wrong, add more debt, do it again, and keep repeating it, and you will lose.
This is why you simply can’t afford to trust just any typical run-of-the-mill loan officer, or you will lose. You must work with a Real Mortgage Consultant to WIN.
A debt consolidation loan must be done the right way. If you don’t, you will be in even more trouble. The debt consolidation may help you feel like you getting immediate relief from your debt, but if you don’t do the next steps right, you’ll be in big trouble.
The attraction of debt consolidation is reducing your required monthly payments. Consolidation takes a list of multiple loan payments and puts them together (consolidates) into one lower payment.
Why does this work? Two primary reasons.
First, the new interest rate is likely lower than the individual interest rates on various loans. Reducing the interest rate (while interest rate is not the most important factor on a loan) will help to reduce the required payment.
Second, stretching the amortization period from shorter term revolving debt (such as credit cards) to a longer term loan (such as a 30 year mortgage) will reduce the monthly payment.
However, this can be a very dangerous strategy if you don’t do it right. And, sadly, typical run-of-the-mill loan officers will never teach you how to do it right. All they are interested in is getting their commission from doing the loan. Never mind if the loan is good for you or if you use it so that it can be good for you. They only care about themselves and their paycheck.
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.
But when you work with your Real Mortgage Consultant with Winner’s Mortgage, you can do your debt consolidation the right way, then use it the right way so that you can WIN with your mortgage and WIN financially. It’s a huge difference. Don’t fall into the typical run-of-the-mill loan officer’s trap. Don’t miss out on the benefit you can get when you work with your Real Mortgage Consultant.
See here how you are never left on your own after a debt consolidation loan with your Real Mortgage Consultant and Winner’s Mortgage. Instead, you get the Winner’s Mortgage Master Plan as a free gift with your mortgage so you can help yourself to WIN. You don’t have to lose like most people lose with a typical run-of-the-mill loan officer, and they don’t even know they are losing.
A major danger with debt consolidation is the temptation for you to add more debt back to your credit card balances by taking on more debt after the refinance. This leads to a higher mortgage balance than before, plus even more new debts with higher balances than you had before.
This is why our exclusive Winner’s Mortgage Master Plan is so important. We have your formula for success. It helps set you up so you can create your success. You can WIN when you know what to do and you do it!
Avoid balloon payments
Understanding how refinancing does work to refinance a loan will help avoid the burden of a balloon payment.
If you took on mortgage financing that is amortized for a longer time than the term of the loan, that loan will come due at the end with a balloon payment – one large final payment required to pay off the mortgage.
A common example of a balloon is a 30/15 fixed rate second mortgage. The payments are set up based on 30 years, but the loan must be paid off by the end of 15 years. If you make the 30 year amortized payments, a large balloon payment will be due on the 180th payment (at 15 years).
You can choose to refinance that balloon mortgage to a new mortgage. This will pay off the balloon mortgage and avoid that balloon payment.
Summarizing the benefits
Refinancing does work well in these situations depending on how you use it. Consider these various benefits and let your fully-trained Real Mortgage Consultant help you make wise choices. Allow Winner’s Mortgage to get the job done for you.
How Does Mortgage Refinancing Work?
After asking “should I refinance my home?” and deciding to proceed, understand its process. How does refinancing work?
Refinancing follows a similar process as using a mortgage to purchase a home. Know your options. This is where your dependable Real Mortgage Consultant with Winner’s Mortgage will be essential. See here why you need a Real Mortgage Consultant, not just the typical run-of-the-mill officer. Trust a proven track record.
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?” Are you qualified for a refinance even with bad credit?
Discover if you are qualified. Get started with advice you can trust at Winner’s Mortgage. Start here with Winner’s Mortgage Client Questionnaire loan application. Your experienced Real Mortgage Consultant will give you the best possible advice personalized to your own situation as you provide here.
How does it work to qualify for refinancing? How long does it take?
Qualifications differ based on the loan program. Here are the general qualifications.
Minimum Credit Score
- Conventional: 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: 0 to 4 years waiting period depending on new loan type
- Chapter 7 bankruptcy: 2 to 4 years waiting period depending on new loan type
- Foreclosure: 2 to 8 years waiting period depending on new loan type
What About Bad Credit?
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.
Your Real Mortgage Consultant will advise you on possible strategies to help you turn your credit around and refinance even if you have bad credit now. A bad payment history will require a minimum 1 to 2 years of good payments, otherwise only less attractive loan programs will be available.
Conventional Mortgage Refinancing
The borrower’s ability to receive a refinance benefit, then to repay is most important in refinancing, not how often you can refinance your home. With different loan programs available, you will know your best option when you talk with your professional Real Mortgage Consultant. Winner’s Mortgage helps you discover your best choices for your situation.
A general DTI (debt to income ratio) guideline is 43% loan payments compared to gross income. A refinance with bad credit might even be possible, check with your leading Real Mortgage Consultant to know. Get the facts and get the job done!
Streamline refinancing can reduce how long it does takes to refinance a house. A streamline refinance replaces a previous government-backed mortgage with the same kind of new loan. For example, refinancing an FHA or VA loan with a new FHA or VA mortgage.
A streamlined refinance of a government loan program comes with fewer documentation requirements than a typical refinance. Examples of these are FHA. VA, and USDA. A streamline refinance requires that mortgage payments are current.
Streamline refinancing does not allow taking cash out of equity. The refinance must create a net tangible benefit to the borrower.
Some basic information about streamline refinances includes:
FHA Refinance Loan
- Interest rates tend to be lower than market rates
- No appraisal, credit check, and job/income verification needed
- Reduced closing costs
- Potential for a partial refund of Upfront Mortgage Insurance Premium (UFMIP) if you had your mortgage seven to thirty-six months
VA IRRRL (Interest Rate Reduction Refinancing Loan)
- Requires limited paperwork
- Requires little to no equity for refinance
- No appraisal, credit check, and job/income verification needed
- Offers generally below market refinancing rates
- No to low closing costs needed
USDA Refinance Loan
- Generally below market refinancing rates
- 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
The goal is to improve their financial standing through refinancing. Even those with bad credit can also use a streamline refinance.
The Winner’s Mortgage Program Refinancing Process
How does refinancing work? You can refinance your home as often as needed when you know how to do it. The Winner’s Mortgage Program refinancing process helps you to WIN with your mortgage refinance.
Phase 1: Analysis
In asking yourself “should I refinance my home?”, understand how to do it. Even with bad credit, you may be able to refinance. The gold-standard Winner’s Mortgage Program will help you throughout the process. To discover more for your own personal situation, simply provide a little more information with the no obligation “Get Started” Client Questionnaire loan application.
Using your secure information from the Client Questionnaire, your rock-solid Real Mortgage Consultant will analyze your situation for your best options. As part of the process, your Real Mortgage Consultant will review your credit report, then schedule your “Get Acquainted” meeting, either in person or online.
Your Get Acquainted meeting begins an awesome relationship with your accomplished Real Mortgage Consultant. You will discuss your goals, strategies and possible obstacles based on your current situation. You will also discuss what’s next, plus the possible loan program and interest rate for you.
Phase 2: Planning
You learn more about your options with your Real Mortgage Consultant. You get all the facts. How long does it take to refinance a house? Questions like this and more will be answered by your Real Mortgage Consultant. In this planning stage, you will determine your refinance strategy and plan.
Using your information from the Client Questionnaire and the result of your “Get Acquainted” meeting, you can have a complete strategy. One viable strategy for refinancing can be consolidating your debts to accelerate your loan payoff. Because debt consolidation is such a dangerous strategy for you if you don’t use it properly, be sure to do it right. Your recognized Real Mortgage Consultant accomplishes this much better for you than just any typical run-of-the-mill loan officer.
Phase 3: Loan Application
With your strategy decided and agreed, your Real Mortgage Consultant will prepare your information as a refinance loan application. Regardless of how often you can refinance your home, the process is the same.
Submitting Additional Documents
Winner’s Mortgage will request any additional documents for the process, which may include the following:
- Updates of Documents
- Recent Pay Statements
- Recent Bank Statements
It helps to the documents ready if needed when you refinance a house to avoid concern about how long it does take to process them.
Signing the Loan Application
Your Real Mortgage Consultant will send you the loan application and supporting disclosures to sign. You can easily do this electronically.
The disclosures include the Loan Estimate which keeps you informed about the fees. The Loan Estimate can also show how you can use your home equity as it is often how borrowers use it as a tool to refinance their mortgages.
Title Opinion and Title Insurance
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 ownership conflicts for the refinancing, as well as insuring the title. You are responsible for paying the lender’s title insurance at the closing.
Winner’s Mortgage will also order an appraisal of your home. A licensed appraiser will report the home’s value and condition to the lender. The appraisal will pass the test if the appraised value is equal to or higher than the required value for your loan amount and program.
Assuming the appraiser does not report a need for significant repairs or improvements, with the necessary value a satisfactory appraisal will allow the refinancing to proceed.
Possible Additional Documents & Updates
In the process, Winner’s Mortgage will continue to verify your employment, bank and deposit accounts, tax transcripts and credit. Therefore, it is critical that you do not make any significant changes in your situation during the refinance process. Detecting any changes could change your initial approval to a denial, so please consult your Real Mortgage Consultant before any financial or employment decisions.
Phase 4: Underwriting
The refinancing process does its work well and relies on how well you manage the process through the advice of your Real Mortgage Consultant.
The lender reviews all information, documents and forms to reach an informed decision. Usually, underwriting conditions need be met before the final approval. Communicate with your dependable Real Mortgage Consultant to guide you through the process of your application.
Phase 5: Closing
Answering the question of should I refinance my home even with bad credit would already have been resolved by this phase. Your closing is scheduled or has already been scheduled by Phase 5. Then you will coordinate with your authentic Real Mortgage Consultant, lender, and title company to complete your closing. You will receive the Closing Disclosure with the final numbers for your review.
At the closing, you might need cash to close as a cashier’s check. Your Real Mortgage Consultant will tell you the exact amount. Get a cashier’s check for the exact amount from your account listed on your loan application. A title company representative will manage the closing. The closing includes signing the loan documents and providing the cash to close cashier’s check.
After the closing, the title company manages transferring the funds, processing and recording the necessary documents. Federal law requires a three day waiting period after signing refinance loan documents. Therefore, the this process begins on the fourth day after closing.
Once the documents are signed, a typical run-of-the-mill loan officer will abandon you and be gone. However, your dependable Real Mortgage Consultant will still be with you, following through to the next phase. You will continue to have support and strategy even after the closing.
Phase 6: Freedom
This phase is your goal by answering the question should I refinance my home. This is where a typical run-of-the-mill loan officer will never reach. Your experienced and dedicated Real Mortgage Consultant will be with you with continuing ongoing coaching and strategic tools with the Winner’s Mortgage Master Plan so you can WIN with your mortgage and WIN financially.
Answering the question, “how does refinancing work?” leads you to the potential to WIN with your mortgage when you follow the right process, the Winner’s Mortgage Program, and work with the right originator, your Real Mortgage Consultant.
Your first step to WIN with your mortgage is here, the no obligation “Get Started” Client Questionnaire loan application. Discover how you really can WIN with your mortgage.