Reasons to Refinance
Thinking about Refinancing, look no further than First Vision Real Estate & Financial Services the home of Refinance.
What is Refinancing? In simple words, it means taking a new mortgage to settle the old one with preferred interest rates and terms to suit your needs.
Whether you are looking for an affordable payment with longer loan terms or you want to consolidate your debt into one monthly payment, refinance is the process to do that.
With a clear understanding of your refinance goals, First Vision Real Estate & Financial Services being the best mortgage brokerage company in Los Angeles will guide through the process.
Some reasons to Refinance:
- Get a lower payment
Lowering your interest rate is one of the most popular reasons for refinancing.
First, if the interest rate has gone down, you can consider negotiating for a lower rate to reduce your monthly mortgage payments.
Second, refinancing can help you to get rid of your mortgage insurance. Mortgage insurance is paid to secure your lender in case you fail to pay the loan. Mortgage Insurance can be eliminated if your property has appreciated by 20%. By choosing to refinance your mortgage you can potentially save a lot of interest’s money over the life of the loan.
Third, you can change your mortgage term to pay off loan earlier or extend the term through refinancing. There are pros and cons to extending your mortgage term. Lengthening the mortgage term means you will get a longer time to pay off the loan. The interest on the loan will increase as the mortgage term increases.
First Vision Real Estate & Financial Services Company in Los Angeles/ California will offer all possible options that will help you make informed decision that meets your requirements.
- To decrease the mortgage term
One reason for refinancing is shorten your mortgage term which means paying the loan off in a shorter period.
When you shorten your mortgage term, you are offered a better interest rate. A lower interest rate over a shorter term implies that you can save a lot of money. Contact First Vision Real Estate & Financial Services to discuss your current loan terms and future plans.
- To get a Cash-out Refinance
A Cash-out Refinance is a type of mortgage that allows you to tap into the equity you have accumulated in your home or investment property over time and turn it into cash.
This cash can be used to pay off debts like student loans, credit card debts, home improvements, boost your savings or used towards a down payment to purchase a second home or investment property. When you consolidate debts, you reduce your monthly obligations. An added advantage is that interest payments on mortgage are tax deductible unlike other loans or debts.
Things to consider before Refinancing
Now that you know some reasons for refinancing, you can now assess your financial position for your goal to determine if refinancing is for you or not.
Here are some pointers to note before embarking on a refinance process:
- Credit score
Knowing your credit score, will prepare you for various refinancing options. There are online tools to help you assess your credit score. Remember that even though minimum credit score requirements may vary from loan to loan, the higher credit score is likely a better chance of loan approval with a lower interest rate which reflects to small monthly payment.
- Equity over your house
Knowing the value of your property is a crucial to your refinancing process.
To do your home valuation (use similar properties), try comparing sold properties, active properties and pending sales near your subject property in your area. This will give you an approximate idea of your property’s worth. The value of your house will determine the amount you can borrow! Knowing the value of your house is even more critical if you are opting for cash-out refinancing. By conducting an appraisal by a licensed inspector hired by the lender will give you an accurate evaluation.
- Monthly mortgage payment
Understanding your monthly mortgage payment is essential in determining how much you can customize your budget. In doing so, you can adjust to the changes (as per your refinance type) to stay within your payment plan.
- Debt to income ratio
The debt-to-income ratio (DTI) is one of the parameters used by a lender to know if the borrower will be able to repay the loan.
DTI is calculated simply by dividing the principal interests, taxes and insurance payment (PITI) + other monthly debts over the gross monthly income.
For example, if your monthly mortgage payment is $1200 and the rest of your other liabilities (such as education, car and credit card loans) is around $800 which equals to $2000. Now you can divide total debt of $2000 by gross monthly income (let’s suppose) $6000, then your DTI would be 33%.
Different lenders and mortgage brokers in California may have different maximum DTI requirements. A DTI of 50% or lower makes a person eligible for refinancing.
Refinance Calculator
FAQs
- Reasons to Refinance?
- Higher interest rate than the current market value
- Want to remove mortgage insurance
- Want to change the terms of your loan.
- Need cash-out for various reasons.
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What is the minimum credit score required to Refinance?
A minimum credit score of 620 is needed to be eligible for refinancing. The higher your credit score, the better the interest rate.
Exploring Your Refinance Options
After clearly identifying your refinance goals, it is important to understand what type of loan programs that will allow you to meet those goals. Below are some of the loan options to consider to allow you make informed decisions about which program best suits your needs:
Lower interest rate
ARM (Adjustable rates mortgage) is a suitable option for you if you want to get the lowest possible rates. ARM has a lower interest rate than the fixed rates because it’s an adjustable-rate loan that is preliminary fixed for a short period and will adjust to the index market rate in the future.
ARM will help you immensely if you have a plan of refinance or sell in the upcoming years (5-10 years).
Do not forget that a lower interest rate alone can’t guarantee a lower payment. Several other factors such as tax, insurance, and the term of your mortgage make up your final mortgage payment.
Change Mortgage term
If you want to decrease your monthly loan payments and not concerned about paying it off quickly, then lengthening the term of your mortgage can be an option for you. By stretching your mortgage term, you will pay a smaller amount every month for a longer period of time such as, from a 15-year loan to a 30-year loan.
Get a Cash-Out
If you want to get a cash-out, there are plenty of loan options available for you. It all comes down to your requirements and your situation.
- If cash out is your main purpose and you want to keep your payment low, then a 30-year loan term will be your best option.
- If you are using your equity to pay your debt-off, a shorter term is a favorable option. Combining the debt into your mortgage, creates a tax write off and saving on credit card interest.
- Choosing a conventional or FHA loan depends on your personal preferences and financial situation. Most of the time, an FHA loan has a lower interest rateand allows a higher Debt-to-income ratiothan a conventional loan. Conventional loans are less expensive than FHA.
First Vision Real Estate & Financial Services can help you decide on the right loan for you.
Decrease Mortgage Term
By shortening your mortgage term, you will be able to pay-off your loan in a shorter time. Often when you shorten your mortgage term, you are offered a better interest rate. A lower interest rate implies that you will be able to save interest money over time.
There are many loan options if you are looking to decrease your mortgage term. If you have a good credit rating, a conventional loan will be the right choice for you. VA loans are the best option for veteran or service members. Talk to First Vision Real Estate & Financial Services experts to explore more options for shorter term loans tailored for you.
Applying to refinance
How to choose a lender?
Mortgage refinancing is a huge step to take. You can make this whole process easy by preparing yourself properly. You need to keep yourself up to date with the right knowledge and find yourself the right lender.
At First Vision Real Estate & Financial Services, we hold your hand and let you take the lead. We equip you with the right information and then let you decide for yourself.It would be wise if you know the questions to ask while choosing a lender. Let us help you decide what questions to ask:
- Will you be available round the clock? 24/7 support is vital. it is necessary to choose someone who will go out of their way to help you, even if they have to take some time out of their usual working schedule.
- Who will service my loan after closing? Not every lender or company provide services after loan closes. But most of the lenders, that First Vision Real Estate & Financial Services originates loans for, services 98% of their loans.
- What is the cost of an interest of rate and fee? There is no set rates and fees for lenders. Every lender charges differently. You have to choose according to your budget and requirements. But don’t get fooled by people offering the lowest costs.
Every good thing comes with a price! Being that, First Vision Real Estate & Financial Services is a mortgage brokerage company we have the option to shop the rates and fees with various lenders. By doing this, it offers the best rate and fees to you.
- Do you have a good client satisfaction rate? Usually, it takes around 30 years, on average (with a 30-year plan), to pay off a home mortgage. You need to evaluate if you can work with a lender for this length of time. You can ask around and look for former client’sreviews and feedback.
- Do you offer online services? Having the option to complete the process online can be a huge relief. You should look for a lender that makes the whole process as easy as possible for you.
- How long will the whole process take?The least amount of time to close a refinance loan depends on the lender’s pipeline of clients. But at First Vision Real Estate & Financial Services being a boutique style loan originator, our clients are not just numbers. We personalize our transactions to close all of our deals within 30 days.
What documents will the lender ask for?
You are asked for a bunch of documents to get the process started. If you keep all those documents ready beforehand, it will quicken up things.
- Most recent pay stubs (at least two)
- Most recent W2s (at least two)
- Most recent bank statements (of two months)
If you are self-employed and don’t have a pay stub, you would need to provide some extra documents to prove your income. You may also need to show all of your tax returns.
If you have someone else with you on the mortgage(spouse), they will need to submit the same set of documents. This step is needed so that the lender gets a thorough idea of your financial state.
Cost of refinancing: fees you have to pay
- Application fee: You will have to pay the application fee even if you are not selected for the loan.
- Inspection fee: Sometimes few inspections might be needed by your lender. In such a case, you will have to pay the inspection fee. Do keep in mind that only a few loans call for an inspection.
- Appraisal fee: To give a correct and up-to-date idea of the property’s worth to the lender, you will need an appraisal. For an appraisal, you will have to pay an appraisal fee. Sometimes the lender might be able to waive off the fee.
- Title search and insurance: A title search is needed to ensure that there are no claims or problems against ownership of your property. Title insurance covers you and the lender in case of any issues raised by former property ownership. Title insurance is a one-time payment.
- Lawyer/attorney fee and closing fee: You/your lender will need a lawyer to close the loan. You will pay a fee to the lawyer for loan closing.
Once you have applied for refinancing, your lender will provide you with a Loan estimate to give you an overview of all the fees and costs you have to pay.
Closing disclosure is a detailed account of final dues given to you by your lender before loan closing. Both, documents will give you an idea of what exactly you are paying for.
Duration for Refinance Process
An average refinance process takes around 35-45 days. But you need to keep in mind that many external factors can delay your refinance process. Lenders are usually not the only ones involved in the process, and they rely on several other people/factors. Your lender might rely on the information that the inspection teams, lawyers and appraisers provide. Any potential delay from their side can significantly prolong your refinance process.
In addition to that, the length of the process also depends on the complexity of your case. If you change your job while refinancing, you can cause a significant delay in the process. Any mistakes or wrong information on the documents or credit reports can also interrupt the process. Whatever the case is, if you keep your lender informed, you can avoid any such delays.
Locking the mortgage rate
Mortgage rates fluctuate on a daily basis. If you plan intelligently, you can lock your application at just the right time before the rates go high.
Mostly you are allowed to lock your mortgage rate for a maximum of 60 days. If you want to extend the time (beyond the initially decided period), you will have to pay an additional fee.
Check out your refinancing options
Give our mortgage experts a call at 310.649.2028 to kick start your mortgage application OR apply online to check out your mortgage options.
FAQS
What is the cost of refinancing?
Refinancing usually costs around 2-3% of the total value of your loan. You might be able to include the cost of refinancing in the loan rather than paying it separately.
Do I need to pay a downpayment to refinance my mortgage?
No, most of the time, you don’t need to put down money for refinancing your mortgage. There might be other lender requirements, such as a high credit score but putting down money is not usually one of the requirements.
Underwriting & Appraisals
Dealing with the Underwritings
Once all the refinance reports are dealt with, First Vision Real Estate & Financial Services will start underwriting your refinance loan. In simpler terms, your financer will check all assets & sources especially the ones included in your home mortgage application and all relative documents.
To secure your home mortgage loan, your loaning application must meet the standard requirements of the loan chosen and set by your bank/lender.
Normally, it takes up to 15 days to confirm your loan amount. But any third-party involvements, like an appraiser, will slow down the underwriting procedure.
Impact of Appraisers in Refinancing
Just like when you purchase a new home, you will need to validate the value of any property owned. Your lender will look into the property to be presented as collateral and its value is estimated in-line with the recent market.
In certain scenarios, your refinance provider will not need an appraisal to approve your refinance. Such as, if your home has been certified in the last 120 days, your certification will not be considered.
Home Loans at Low Rates with Appraisals
Banks usually cannot provide finances above the estimated value of your mortgage home. In simpler terms, the appraisal amounts off your house should not be less. Otherwise, there are going to be some complications. To tackle such complications, the following can be handy:
- Reduce your Overall Refinance Amount
On a rare occurrence, you might need to bring liquid money to sort out differences between the value of the property & appraised amount. But most of the time, cash-out refinance is used to lower the loan amount.
- Revoke your Refinance Plan
For a house with a low appraisal value, refinancing might not be the best option for you.
Best Possible Deduction is one of two alternatives.
- Your appraisal is of an equal or higher value than expected.
- Cancel the refinance and pay up the lender & appraisal dues.
So, it is advised to do your own research on-hand to estimate the value of your property.
After all of the paperwork is sorted out by the underwriter, the lender will contact you to fixate a time of closing and to review the final paperwork.
FAQs
Q: How much will a legitimate appraisal cost me?
An appraisal can cost you from around $200 to $600. But bear in mind, the cost can exceed the $600 mark.
Q: Who will be investing in my loan?
Your loan investor is primarily determined by the loan you choose. For loans like FHA, we have the Federal Housing Authority and for the VA Loan, we have the U.S. Dept. of V.A.
The most common investors in conventional mortgage plans are Freddie Mac & Fannie Mae.
Sealing your Refinance Plan
Winding-up your refinance is just like closing the deal on a new house. But, since you already have ownership of a house, it is unlikely for you to need a realtor.
What to Bring for Refinance Finalization?
Here are a few things to bring when closing your refinance plan:
- Some sort of Identification Document (Passport, ID, Driver’s License)
- A cheque to clear all/any refinance closing expenditures (if needed)
- Finalizing Disclosure Documents, so you can cross-check the final paperwork.
- Speed Dial certain contact if the need arises like your financial advisor, realtor, or even your lawyer.
Who should be attending the Closing?
Anyone associated with the loan or refinancing is obligated to attend the closing. But, due to some reason, if you are unable to attend, you will grant the power of attorney to a viable substitute. A representative of the state can be present. But in some states, a witness is needed to preside over the closing as well.
How much does a Refinance Closing Cost?
Costs of Closing a Refinance plan vary according to the loan you’re enrolled in. e.g.
Before you finalize your refinance, you will be provided with a Refinance Disclosure form that will provide you a step-by-step procedure of the costs to close the deal.
You will have the liberty of reviewing your disclosure paperwork over the span of three days. Giving you the opportunity to decline if it doesn’t fit your bills. Regardless of your decision, you will still pay for the services utilized such as providing appraisals and attaining credit summary reports.
FAQs
Q: How long does it take to finalize my refinance?
As there are fewer people involved, finalizing a refinance is much quicker than when you were buying a home. No doubt, you can always take your time when going through the paper you’re about to sign-off. But, just to be on the safe side, conclude a thirty-minute timeframe for signing & finalizing the documents.
Handling Mortgage Installments
Since all the administrative work is finished, you can begin profiting from your refinance contract. Regardless of whether you’re getting a lower installment or a cash-withdrawal; here is what you have to deal with after closing your refinance:
Own an ESCROW Account?
If you own an ESCROW account associated with your previous lender, you can get your money back in a variety of ways.
Receive a check
If you’re getting your ESCROW Amount via check, you can get it in approximately 30 days’ time.
Use to pay off old-loan
This will provide you two distinct perks.
- The total amount needed to pay off is reduced.
- If you’re using an ESCROW Account for your new loans, your prior ESCROW fundings can be used in your new loan.
Your lender will ask your preferred option, nevertheless, it is recommended to use your old ESCROW funds to pay off your new loan. This will allow you to procure swift payments on a lesser loan ratio.
Pay Extra Installments
You can save a few bucks by making extra payments to your loan plan or making extra monthly payments. Even if you make only one plus-payment per annum, you can still save a lot in terms of interest over the span of your loan.
FAQs
Q: How can a single mortgage plus-payment save me?
Clearing additional mortgage payments will help you pay off your mortgage faster and with less interest. How much you are going to save is dependent on your mortgage loan rates, present mortgage amount, & the years left out in your mortgage plan.