Have you thought of refinancing your home lately, but don’t know where to start or what’s involved? Interest rates are at all-time lows… We're sure you’re seeing it mentioned on TV, hearing it on the radio, or from a co-worker! If you’re interested in knowing more, keep reading.
Experian defines refinancing as the process of “taking out a new loan to pay off your original mortgage loan”*… And it’s a fantastic time/way to lower your interest rate or reduce the term of your home loans. Given the current economic condition, it may even put money in your bank for security or pay for the credit cards used on well-deserved items.
Given the current flood of home loans, it could take up to 45 days. We find that with a very clean file that 20 days is plenty, but let’s set an expectation of 45 days.
Submitting a complete file consists of the following documents:
Required documentation will be a bit different for each loan file, based on your situation. Some loans allow asset depletion – a large savings or investment account that you regularly withdraw from. Using this loan type, the account’s balance needs to show that your regular withdrawals can continue for 3 or more years. Getting too technical? We understand, and we’re here to help. Contact us and we’ll work together towards an equitable solution!
Asset documentation is provided to show the ability to close the loan and/or show reserves that may be required. This is made up of 60 days of bank statements, retirement accounts, or investment accounts. Cash on hand is rarely allowed, but always a good idea for the family.
Reserves are rarely needed to show on a refinance of a primary residents. You would need to show the amount required to close the loan if those expenses were not added back into a loan, but that’s your choice. However, when refinancing an investment property or second home, you will often need to provide reserves. Don’t move money between accounts prior to providing your bank statements, as you will be required to provide a paper trail to prove the deposits came from an acceptable source. This is unwarranted work that you do not need.
Creditworthiness is ALWAYS a factor. Generally, a credit score of 720 or better will get you the best interest rate. 680 is the next level, then 640. If your credit score is below 640, there may be limitations on loan to value (LTV), property type, and limits on the cash amount taken out. Not sure how to manage/check your credit score? We discussed credit scores in length on a recent blog. If this is a concern, please feel free to reach out to us to see what we can do.
This is where the investor’s Appraisal Management Company (AMC) visits your home to do an independent evaluation of your property. The appraiser will come to your residence to measure rooms, take photos of the home’s interior and exterior conditions, and take notes of the fantastic kitchen you had re-done last year or the deferred maintenance of the paint on the eves…
Yes, the appraiser reports that and everything else observed during the one short trip. Most of the work is done through technology resources, where comparable properties are evaluated against yours. In the end, they report the property’s condition and value to the lender. The reported value is then measured against the loan amount we submitted which makes up your LTV.
All loans have a limit on LTV. Cash-out generally is 80% unless you’re a veteran and do a VA loan. But again - there are lots of options, different loan types, terms… And we can discuss all of the possibilities available.
So we have covered a lot of information about refinancing your home… All of which are important aspects of the process. Try not to feel overwhelmed - simply make the choice and then let’s chat about it. You may find plenty of alternatives that suit you better or that this maybe your best option! With refinancing, you can most likely reduce your payment, or the term, or both (!) while potentially taking money out for security or keep up on payment. In any case, it costs absolutely nothing to chat about it and see what your options are. Oh, by the way, congratulations on being a homeowner, it’s often one of the smartest and largest financial decisions a person makes in a lifetime.
With today’s low rates, it’s an incredible time to refinance. But interest rates don’t only affect refinancing situations… They also affect new mortgages/loans! With that being said, it’s also a great time to sell your home. If you're thinking of moving up or away, here are the facts…
Inventory is at an all-time low. This means there aren't enough houses for people who are looking to buy. Pair that with today’s low interest rates – buyers can afford more house! It’s a win-win situation for you (seller) and the buyer. Buyers can afford your home and you’re able to upgrade to your next home, while you both take advantage of today’s low interest rates!
See how low the rates are and how competitive the industry is? If you’re thinking of refinancing, selling, OR buying, this is an absolutely great time.
* Sources, in order of appearance:
Unfortunately, yes. The CFPB (Consumer Financial Protection Bureau) posted an article not too long ago about proposed changes...
In our 2nd success story, we helped a Veteran turn equity into cash... which he used to fulfill his dream purchase: a plane engine!