By Charlotte Green
With mortgage rates at near-record lows, many buyers are moving to lock in the best rate on their new home. But what if you already own a home? You don’t have to sit on the sidelines and watch the deals go by. You can get in the game by exploring your refinancing options.
Usually, there are two main reasons a homeowner considers refinancing: reducing the interest rate and/or term of the mortgage or taking equity out to help with debt consolidation, paying for education and home improvements. Refinancing is not one size fits all. You can lower your interest rate, reduce your monthly payment, move from an Adjustable-Rate Mortgage or to a Fixed-Rate Mortgage, remove or reduce mortgage insurance or reduce the term of the mortgage.
What do you need?
A good rule to follow is the “Rule of Two”: two months of bank statements, two most recent pay stubs, two years of federal tax returns and business returns, if applicable, and two years of W2s and/or 1099s. Recent mortgage statements, Home Equity Line of Credit statement, tax and insurance bills for any properties owned, as applicable, are safe bets, too. Please note: these items are not required to submit an application and receive a loan estimate.
What will it cost?
Closing costs vary based on your loan amount. A good rule of thumb is 1.5 percent of the loan amount you are seeking. If you escrow (include taxes and insurance in your monthly payment), you will need to provide additional funds to establish the escrow account. This will vary based on your property tax and insurance costs and due dates. Funds held in an existing escrow account would be refunded to you after closing. You will typically need to pay the appraisal fee up front; the cost can range from $450 to $800 or more depending on the complexity of your property.
Who will I be working with?
Residential mortgage loan officer: This person will discuss your wants and needs; review your employment, income, credit and asset profile to determine the best loan for you; complete the loan application and lock in a new interest rate. They are a key point of contact throughout the process.
An appraiser will come to your house to determine the value. They will schedule with you directly.
Loan processor: This person takes over to make sure you’re providing all the documentation required to get your loan approved.
Loan closer: This person takes over to make sure all the final documents are in order and coordinates with all parties to schedule your closing.
Closing attorney: You will meet with the closing attorney to sign the final documents. Three days after closing, they will record your new mortgage and send payment out to your previous mortgage holder to pay off your previous loan balance.
How long does it take and how do I begin?
Refinancing typically takes around 45 days to close from the time you submit a formal loan application. You can meet with a loan officer at your bank and, in many cases, you can apply online.
Everyone is a little different. At The Coop, we want to talk about your “why” so our team can help you find the best loan for your needs.
Charlotte Green is Residential Mortgage Sales Manager, Officer, at The Cooperative Bank of Cape Cod. She can be reached at 508-568-3308 or firstname.lastname@example.org.