Mortgage rates are still very low and refinancing options are better than ever. For many, the decision whether or not to refinance your mortgage is fairly easy. This is something I can do with you over the phone. Simply compare the difference in monthly payments and divide that into the amount of closing costs needed to close the loan. The result is how many months it would take to “recover” the cost of refinancing. But there’s more to it than that. If calculating a recovery date was all it took, how long should it take to make refinancing worthwhile? One year? Two? This is a conversation you and I need to have. And what about a “no closing cost” loan? That can also be an option.
Benefits of Refinancing
A lot of times it’s not about the rate. At least entirely. In light of today’s rate environment, many are thinking of switching to a shorter loan term. A shorter-term loan can generate significant savings in mortgage interest. Yes, the payments will be higher but again with these lower rates the difference in payments can be minimized. There are several things to consider but I can help you navigate the refinancing process and provide everything you need. Over the phone, we can discuss today’s rates, closing costs, and any other considerations. Just know that the process doesn’t really start until you submit your loan application.
How it Works
Submitting a loan application does not mean you’re obligated to take out a new loan. You can submit your loan while thinking about it. If you decide to hold off and keep what you have, no harm, no foul. Yet there are advantages when you submit your loan, even if you’re still undecided.
One of the more important things to consider is not just current market rates but having the ability to lock in that rate when you’re ready to go. Without an application, few lenders will even consider tying up money from their credit lines to someone not fully committed.
Once submitted, your loan can be electronically submitted to an Automated Underwriting System, or AUS. After an AUS submission, a list of items needed to close your loan is provided. This system has been in place since the 1990s and replaces the “manual” approval. Prior to the AUS, applicants were asked to submit nearly everything just in case it was needed. Two years of tax returns, most recent paycheck stubs, bank statements, credit explanation letters when needed, profit and loss statements and more. An AUS on the other hand doesn’t automatically require this laundry list. Instead, the AUS “findings” will list the minimum amount of documentation needed.
This is also important as it relates to a property appraisal. An AUS decision may not require a full appraisal. A full appraisal means the appraiser visits the property, takes pictures of the exterior as well as the interior. For many who are refinancing, a full property appraisal isn’t needed. This saves both time and money.
Why Starting Now Streamlines the Process
This means once you’ve decided on refinancing, not only has your application been submitted but you know in advance what will be needed. It’s also a good idea to submit this documentation after submitting your loan application even if you haven’t decided to move forward. The advantage here is that all you need to do is pick up the phone and request a rate lock. This puts you in the front of the line when it’s time to order closing papers. Others who have not submitted an application who are waiting on rates to fall or some other consideration will have to wait in line.
The approval process is fairly straightforward. It’s simply a matter of going down the AUS approval checklist and checking off all the boxes. By submitting your application while deciding, your loan will sail through the complete process once you’ve decided to move forward.