Refinance FAQs and Information

Highlights

  • Understand when it makes sense to refinance.
  • Learn what a refinance lender needs from you.
  • Comparison shop, in order to find the best loan.
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Eight Basic Refinance Questions Answered

Here are quick answers to the nine most popular refinance questions we have received. You will find more detailed information on all of the questions below,throughout the Refinance section of Bills.com,

1. What is a Mortgage Refinance?

A refinance is a loan transaction where a homeowner with an existing mortgage gets a new mortgage, paying off the balance of the existing mortgage. A refinance replaces the existing mortgage with a new one.

2. What are the Best Reasons for Refinancing?

Homeowners refinance for different reasons, including:

  • Lowering their mortgage interest rate
  • Taking a cash-out refinance to consolidate other debt, finance a big-ticket purchase, or pay college education expenses
  • Increasing the length of the loan term, to end up with a smaller monthly payment
  • Decreasing the loan term, to pay off the loan faster
  • Changing from an adjustable rate to a fixed (or vice-versa).

Read the Bills.com article about Reasons to Refinance and Not Refinance Your Home, to learn more.

2. What do I Need to Qualify for a Refinance Loan?

In order to qualify you will need to show:

  • Verifiable income that is sufficient to make your monthly mortgage payment and the monthly payments on other debts like car payments and credit card debt.
  • A minimum credit score. The exact score you'll need depends both on the type of loan you apply for and the lender with whom you work.
  • A credit history without recent, major blemishes. Even with a qualifying credit score, your refinance could be derailed by a recent bankruptcy, collection accounts or a judgment against you.
  • Equity in your home. The more equity you have, the more loan programs that are available. If you need to finance more than 80% of your home's value, expect to pay mortgage insurance.

Read the Bills.com resource 4 Key Questions Refinance Lenders Want Answered in Your Refinance Application, to learn more.

3. How do I Find Out if I Qualify?

The fastest and surest way to way to determine if you qualify is to check with a mortgage lender or broker. Only be closely examining your complete situation and reviewing the supporting documents you supply can a lender determine if you can qualify for a refinance.

4. What is the Best Loan for Me?

Which loan is best for you depends on your individual situation. Start by working to determine your goals for refinancing. Once you define your goals, an experienced loan officer can help you reach your goals or advise you whether a specific loan program may be best for you.

Tip
If you have less than excellent credit or very little equity in your home, look into an FHA refinance loan. FHA home loans are available, from some lenders with credit scores as low as 580. FHA loans also are available up to 96.5% of your home's value.

5. How Do I Find the Right Lender?

Comparison shopping is the best way to find the lender, along with checking out the reputation of any prospective.

Quick tip
when you are ready to shop for a mortgage, get a free mortgage quote from a membed of the bills.com mortgage network.

6. What are the Basic Documents Will the Lender Need From Me?

The basic documents your lenders will need:

  • A formal loan application
  • Proof of your income, usually some pay-stubs and recent tax returns.
  • Permission to pull your credit report.
  • An appraisal of your home's value.

7. How Much Will a Refinance Cost Me?

Your costs depend on the loan program you apply for as well as how you choose to structure your loan. It is possible to get a refinance loan without spending any money out of pocket. That doesn't mean that there are no costs, but can include them in your loan. "No cost" loans usually come with a higher interest rate. Pay attention to costs your lender charges, such as origination fees, processing fees, discount points, as well as third-party fees, taxes and other required transactional expenses. Because costs can vary widely,  comparison shop to find the best loan.

Read the Bills.com resource What Are Refinance Rates Today and How Are They Determined?, to learn more.

8. Is Now a Good Time to Refinance?

This is one of the most popular questions that we receive at Bills.com. Rates reached historic lows in 2012. Rates then started climbing, but remain very low. The bottom line is that rates are still low enough that it makes sense for you to see if refinancing will save you money.

Quick tip #2
Use the Bills.com Mortgage Calculator to give you a quick 'Yes/No' answer to see whether a refinance loan can save you money.
Get Mortgage Rates!
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8 Comments

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  • DY
    Sep, 2013
    Debbie
    Wells, Maine
    My husband and I started refinancing our home Labor Day 2012. It is now a year later. I have been trying to get this process done. Have complied with everything asked of us. I ask why it is taking so long and don't get any answers. Is there any thing we can do? We would go with someone else but we have already had to pay for 3 appraisals with this company and don't want to start over from scratch.
    0 Votes

    • BA
      Sep, 2013
      Bill
      Debbie, while it is painful to start over and see the money and time you've spent so far go for naught, I can't see why the refinance is going to go through with your current lender when they are not even willing to answer your questions. Perhaps it is worth one more call to your current lender, trying to reach the highest level in the company that you can or to email, Tweet, and post your grievances on their Facebook page. Who knows? Maybe that will get you the answers that you need.

      I think you should shop for another mortgage. You will probably pay for yet another appraisal and interest rates are higher than they were one year ago. The bottom line, however, is whether or not it will improve your situation to refinance at today's rates. If it will, move forward with another lender now. Disclose to the new lender what has happened and what kind of documents you were asked for again and again, so you can quickly determine if working with a new lender will allow you to finalize the loan.
      0 Votes

  • GF
    Feb, 2013
    gail
    Columbia, SC
    I am in my second year of bankruptcy. I have an FHA loan. I have had it 10 years and never refinanced. I need to refi in order to remove my ex-spouse from the loan. Is this possible? Can i still qualify for the HARP program or is it strictly for fannie mae or freddie mac?
    0 Votes

    • BA
      Feb, 2013
      Bill
      HARP is strictly for Fannie Mae or Freddie Mac loans, so that is not an option. The FHA streamline or a standard FHA loan could be an option, if you are doing a Chapter 13 BK. FHA borrowers can be in the middle of a Chap. 13, as long as they get the bankrutpcy trustee's approval, they've been making their Bk payments on time for at least one year, and they can demonstrate stable income.
      0 Votes

  • MP
    Feb, 2012
    Mary
    Maple Shade, NJ
    Hello Bill, I am in the process of refinancing and since I have a lock in rate awaitng a settlement date. Do I have any options if the interest rates drop prior to settlement?. Thank you
    0 Votes

    • BA
      Feb, 2012
      Bill
      Your options will partially depend on the terms of rate lock that you have. Check the terms with the lender. If the lender does not allow for a change, then one option is to go to another lender. You will lose any upfront fees you paid. Locking in a rate protects you against losses caused by an upward swing of interest rates. This can come at the cost of gaining from a lower interest rate.
      0 Votes

  • KH
    Jun, 2011
    kim
    Santa Cruz, CA
    My ex-husband refinanced the mortgage on a house that we bought 7 years ago. I have never lived in the house with him. Due to flood damage the house is destroyed, I have not been able to get my name off the loan. He is walking away from the home. what can I do?
    0 Votes

    • BA
      Jun, 2011
      Bill
      Your choices are limited, unfortunately. When you put your name on the loan, you made yourself financially responsible.

      I think your best course is to first speak with the lender, to see what they want and what flexibility, if any, they offer. Then consult with an attorney and possibly a tax professional. The tax pro will be able to tell you if you can use the IRS Form 982 to avoid paying any taxes on a deficiency balance, if you receive a 1099 for any amount the lender writes off. The attorney will help you figure out the best way to move forward wtih negotiating with your lender and how you and your ex's divorce decree affects the responsibilities each of you has.
      0 Votes

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