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Refinancing your mortgage is one of the biggest investments you can make – but this decision can help you move closer to your financial goals. We’ll look at why refinancing can be the right move, as well as answer the frequently asked questions many have when weighing this important financial decision. There are plenty of benefits to refinancing, but a deeper dive is required to understand if this is the right call for your future. 

Why refinance?  Some benefits include:

• Lowering your mortgage payment
• Paying off your mortgage sooner rather than later
• Funding home improvements
• Freeing up cash to pay for medical or school expenses
• Lowering monthly payments to help consolidate your debt
• Cashing out to invest or buying additional real estate
• Removing a cosigner or borrower after a divorce
• Getting out from under a loan with an adjustable rate or a balloon note

Is refinancing a good financial decision?  

In general, we advise against refinancing if the closing costs can’t be recouped through interest savings within 36 months. In cases where the funds are for home improvements or medical expenses, this isn’t necessarily the case.  There may be other ways to accomplish your goals, like a home improvement loan or a home equity line of credit.  

When can I refinance my mortgage?

As many times as it makes financial sense to do so. The only caveat is that you might have to wait six months from your most recent closing if you are taking cash out.  If you decide to refinance, the sooner the better. 

How does refinancing work? 

It’s a five-step process:

1. Apply online, over the phone or in person

We’ll look at your income, assets, debt and credit score to determine if you meet the requirements to refinance and can pay back the loan.
Some documents we may need include: 

• Two most recent pay stubs
• Two most recent W-2s
• Two most recent bank statements
• Copy of current picture identification
• Property line survey and homeowners insurance agent’s contact info

2. Lock in your interest rate

You may be given this option so your interest rate doesn’t change before the loan closes. This lock can last anywhere from 15-60 days.

3. Underwriting

Once you’ve applied, we will begin the underwriting process to make sure all the information you provide meets the requirements set forth by FannieMae, FreddieMac, FHA, VA or USDA. 

4. Home appraisal 

An appraisal may or may not be needed. In general, a full application is needed to determine the need for one.  If one is needed, federal regulations require us to order the appraisal.  All you need to do is make sure your home is presentable and that any major renovation projects are mostly complete.

5. Closing the new loan

Once the underwriting and appraisal process is complete, it’s time to close your new loan. Before you close, we will send you a disclosure with all the final numbers and figures for your refinance. Once you’ve closed, you have a few days before it’s considered final. You can always cancel by exercising your right to rescind any time before the grace period ends. 

What options are there other than refinancing to accomplish my goals?

At First State Bank, our mortgage loan advisors are well-versed in the details of refinancing.  Please contact one of our local experts for a free total-cost analysis and to discuss options that will meet your long-term goals.

Call us at 940-665-1711 or visit Mortgage.FirstState.Bank to start your refinancing journey today!

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