Should I Move or Refinance?
When you are up to your neck in bills and are having trouble scraping money together just to make your monthly mortgage, you may catch yourself asking a big question, “Should I move or refinance?” Mortgage Home Base has four other questions that should be taken into consideration before choosing between the two.
The biggest decisions you can make when it comes to your home is whether you should sell or refinance. Neither one is a fun process to endure. Selling and moving may cost you even more, considering all moving service costs and a new mortgage loan purchase.
While there are several good reasons for why you would want to refinance or move out of your home, you should ask yourself the following four questions:
- Am I really ready to move or am I just desperate for a better deal?
- Can I afford the closing costs of a new mortgage and moving service costs?
- Does it make sense to refinance right now and how much will it help my current situation?
- How long am i willing to stay in the new home?
These questions may help you re-evaluate your current situation and have you changing your mind completely, or it can even help you make a better decision.
Reasons To Refinance
Refinancing a home can be a long process, after all you are reapplying for a better mortgage rate or loan term. Here are a few common reasons why homeowners are refinancing today:
- Take advantage of lower mortgage rate
- Ditch an adjustable-rate mortgage for a fixed-rate mortgage
- Cash-out for extra money through home’s equity
- Refi to buy
- Combine home equity line of credit (HELOC) with first mortgage to get rid of HELOC rates
- Remove a former spouse from mortgage note?
Steps of The Refinance Process
If you have gave refinancing a lot of thought, it is important to consider the process part of it as well. It can be a little hard to know what steps to take, especially if it is your first time with a refinance on a home. Usually, for a refinance to be completed, the borrower will be responsible for paying any and all associated fees including, closing costs and application fees.
Applying for a Mortgage Again
The very first step is to apply for a new mortgage loan. This application will require information about the property and yourself. Depending on your lender, this is sometimes able to be done online or over the phone if you are not able to do it in person.
Documentation Requirements
In order to verify all information of your loan application, the lender may request for copies of documents such as: bank statements, pay stubs, W2s and tax returns to name a few. All required disclosures must be signed and turned into your lender in order to proceed with the refinance.
Truth in Lending
One of the steps required in a refinance process is having the lender provide you with a Truth in Lending Disclosure within 3 business days of them receiving your loan application. What should be included in the disclosure is the (Annual Percentage Rate (APR) and the total amount that is approved for you to borrow. Also, this disclosure may limit you on how long you will have to close your mortgage loan, due to laws surrounding it.
Good Faith Estimate (GFE)
By law, a lender is to provide a Good Faith Estimate of all fees and closing costs of the loan within 3 days of receiving the loan application. In addition to the GFE, it should summarize your new mortgage loan term and monthly payments.
Formal Offer
As soon as all the above steps are taken, your paperwork will be forwarded to a loan processor for preparation and review. Once this process is complete, the loan filed will go through an underwriter who will make the final decision based on the criteria of the lender.
Appraisal
Before your loan gets approved, a home appraisal must be performed on the property in order to get an estimated market value. The property can now be compared with other recent sales within your area. The lender will then take that estimate and put together a reasonable amount and mortgage terms for you to consider.
Closing Costs
Once the final approval is given, you should be ready for the closing part of the refinance process. During the time of closing, borrowers are required to pay for the fees of processing the loan application. These fees can be at least 3% of the total loan amount and is reflected on the GFE. These charges will also include the appraisal, origination, and the title work fees. Keeping in mind, sometimes there may be upfront expenses throughout the entire process.
