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The Mortgage Refinance Process

                  The historically low interest rates that we have seen for the past few years have allowed many homeowners to save hundreds of dollars on their monthly mortgage payment by refinancing.  If a refinance of your mortgage seems like the right decision for you, it is important to know the steps of the process.

1.      Deciding to refinance:  It may take a little research or a conversation with a mortgage specialist to decide if a mortgage refinance is right for you.  Although refinancing almost certainly will come with fees of a few thousand dollars, this upfront cost should be made up in less than a year if the monthly payments are less than you’re currently paying.  Just how much of a rate savings determines if refinancing is the right move for you depends on numerous factors, such as loan size, time remaining on existing loan, and current rate.  Consult your mortgage broker for a more in-depth analysis.

2.     Choosing the loan:  There are many different types of mortgages available today to the average homeowner.  The is no “one size fits all” when it comes to your homes mortgage.  Deciding to go with a 15 year fixed, 30 year fixed, or some form of adjustable will depend greatly on your individual circumstances.  Do your research and contact a mortgage specialist to find out which loan fits you best.

3.     Applying:  The application process has become relatively streamlined over the past 10 years or so.  You can often apply over the phone in less than an hour.  Certain documentation is often required (pay stubs, bank statements, etc.) so the quicker you find and submit this information to your mortgage professional, the quicker your loan can get approved..  During the application process, the mortgage representative will just ask for information verbally which will be confirmed with this documentation later.

4.     Underwriting:  During the underwriting process, the mortgage company or bank does its due diligence.  They will review the required paperwork from you, they will have the house appraised to confirm its value, and they will evaluate your credit.  This will lead to a decision by the bank or mortgage company as to whether or not you are eligible for the loan be applied for.

5.     Closing:  If you are approved for your new mortgage, there will be a “closing”.  A “closing” is the date when the new mortgage actually becomes legal.  At the closing, the funds from the new mortgage are distributed to either pay the old loan or for you to receive.  The new mortgage now becomes the mortgage of record and the refinance is officially complete.  As of this date, your old loan has been satisfied, or paid in full, and you will begin making payments on the new loan.  Your refinance is officially complete once the closing is complete.

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