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There are many reasons why a homeowner may consider a mortgage refinance. Refinancing your mortgage may allow you to establish a payment plan that can result in a home owned free and clear in less time. This process may allow you to lower your monthly payments, or you may benefit from obtaining cash out proceeds from your refinance. For some, it may be possible to enjoy all of these benefits. Taking time to learn more about the mortgage refinance process can help you to enjoy the benefits available to you through refinancing your home mortgage.
Define Your Goals
Most homeowners who pursue refinancing their home mortgage do have a firm goal that they want to achieve in mind. Defining what this goal is can help you more clearly identify which loan programs are best suited for your needs. You may find that refinancing allows you to enjoy additional benefits as well, but you want to ensure that the loan program you move forward with meets your primary objective.
Review Loan-to-Value (LTV) Requirements
Lender requirements for the loan-to-value ratio on your loan request will vary based on the state you live in, if you are obtaining cash-out from your refinance, if the home is your primary residence, and other factors. The loan-to-value will be based on value indicated from a new appraisal. However, you may have a fairly good idea about the value of your home after reviewing tax records and recent sales in your area. You may contact a real estate agent to value your property as well. By understanding the LTV requirements that lenders may have for your loan request, you will be able to determine if you may obtain a loan amount that meets your needs.
Shop for Rates
If you believe your property value is sufficient to support the loan amount you need after reviewing lender LTV requirements, your next task may be to shop for interest rates. There are many ways to shop for rates. You can visit bank and lender websites directly, use the services of a mortgage broker, or use an online rate comparison website. After finding a loan program that offers a competitive interest rate and that offers an LTV that meets your needs, you can then consider applying for your loan.
The Loan Process
The loan process with a refinance is often less stressful than what you may recall it was when you purchased your home. You will have to submit a new loan application and all required paperwork. Generally, there are up-front fees that you will need to pay for out-of-pocket, such as for the credit report and appraisal. You will need to provide the appraiser with access to your property so he or she can complete the appraisal report. Once the lender has all required paperwork from you and the appraisal is complete, the underwriting process will begin.
Closing on Your New Loan
Once underwriting has been completed, you will receive word about your loan approval status. A mortgage refinance close takes place in the office of a title or escrow company, just as your purchase transaction closing did. The title or escrow company will release work to release the lien your current lender has on your property and will certify the new lien in place with your new loan. Your current loan will be paid off with proceeds from your new loan. Any funds that are owed to the lender or to your existing mortgage company will need to be paid. Any funds that are due to you, such as your proceeds from a cash-out refinance, will either be provided to you in a check form or may be wired to you, depending on the policy of the title or escrow company you are working with.
Many people may benefit from refinancing their existing mortgage. Take time to explore the benefits you may enjoy today, and start shopping for a great new mortgage loan.