What Do You Need To Refinance a Home?
Refinancing is a nerve-racking decision. If you don’t ensure you have everything you need and meet all the qualifications, you could end up with a ding on your credit but no benefits to show for it. There is no foolproof way to prevent this from happening. Oftentimes, applying for a loan is a gamble. Lenders frequently change their lending practices and criteria, especially during economic crises. So, what do you need to refinance a home?
Good Reasons
Without a doubt, successfully refinancing your home could free up thousands of dollars in cash. However, just like when you empty out your savings, once you tap into that equity, it will take some time to rebuild it. It’s also a good idea to ensure the benefits are worth the closing costs. Bankrate considers these factors as good reasons for refinancing:
- Eliminate mortgage insurance after building 20% or more in equity.
- Change your loan from a variable interest rate to a fixed-rate mortgage.
- Reduce the term of your loan, such as from 30 years to 15 years.
- Reduce your monthly mortgage payment.
- Cash out the equity in your home.
Solid Finances
The more promising your finances, the higher the likelihood of getting a better deal than you originally had. Stable finances are composed of two factors: credit and cash. Ideally, you have a high credit score of 720 and above. You should also have low debt obligations and a high enough income to qualify. Most of this information is encapsulated in what banks refer to as your debt-to-income ratio. Note that you might also need cash in hand to cover fees.
Documentation
When refinancing your home, you need to get a hold of all the documentation you have regarding your property and personal finances. Different situations might call for different information, but these are some of the most commonly requested:
- Tax returns
- Pay stubs
- Proof of homeowner’s insurance
- Proof of title insurance
- Statements of debts and assets
- Mortgage contract
Equity
In most cases, banks will not consider refinancing your mortgage unless you have had it for a few years and built up some equity. Equity is the difference between your mortgage balance and what the home is worth. Market factors and home upgrades can cause your home value to fluctuate. The best time to refinance is when markets have pushed prices upward. You can also build equity faster by voluntarily paying your loan balance down.
Trusted Lender
When refinancing your home, there is no need to choose the bank you originally financed your home with. The bank might want to negotiate to keep you, but you will likely find better terms elsewhere. At UW Funding, Inc., our clients trust us because we put their financial stability first. By constantly monitoring home loans, we can ensure they always have the best rates and know when might be a good time to refinance.
Are you looking for a trustworthy lender to partner with for your refinancing process? We’re here to help! You can even use our home appraisal tool to get a general idea of how much your home might be worth. Contact us today to learn how you can save time & money when you refinance with UW Funding.
Source:
- https://www.bankrate.com/mortgages/ways-to-refinance-mortgage/