Refinance your mortgage

It is always a good time to refinance if you have a need for it.  Although rates are rising, compared to historic data rates are still relatively low.

There are several reasons why a consumer will refinance their mortgage loans:

  • Upgrading or downgrading the size of the home
  • Lower the monthly mortgage payment
  • Have an adjustable-rate mortgage and want to switch to a fixed rate
  • Need cash for home improvement such as, a leaky roof, child’s education and/or an addition

Refinancing your mortgage can be a great solution for satisfying all of these areas. 

There are two main ways to refinance a mortgage:

Rate-and-term financing

Typically, the remaining balance is refinanced for a lower interest rate or a shorter loan term, such as going from a 30-year loan to a 15-year to save money and build equity faster.

Cash-out refinancing 

The homeowner borrows against his equity and takes out a new mortgage for more than what is owed, then gets the difference in cash or uses it to pay higher-rate debts, such as credit cards.
Here are several steps typically used during the refinance of a mortgage loan:

  • Check your credit
  • Choose a lender & apply for the loan
  • Submit your documents 
  • Get an appraisal
  • Sign your loan documents
  • Closing

Review Credit Report:  Credit reports are kept by the three major credit agencies - Experian, Equifax, and TransUnion. They show whether you are habitually late with payments and whether you have run into serious credit problems in the past. A credit score is a number calculated from a formula created by Fair Isaac Company (FICO) based on the information in your credit report. It's not unusual to have a different score at each agency.

Credit scores range from as low as 300 to a high score of 850, of course the higher the better.  A low credit score may hurt your chances for getting the best interest rate, or getting financing at all. So get a copy of your reports and know your credit scores. You can get a free copy of your credit report from each agency every 12 months. You can request a copy here. Check your credit score at least 60 days before applying.

Errors are common on the credit reports. If you find any discrepancies, contact the agencies directly to correct them, which may take two or three months to resolve. If the report is accurate but shows past problems, be prepared to explain them to a loan officer.

Choose a lender:  Shop and compare rates and the cost during your selection of a lender. WPCCU, as well as many financial institutions, mortgage companies, other credit unions and loan brokers can help you refinance. So it’s a good idea to shop around and talk to a few lenders before you pick one. Ensure the lender you choose is someone who’s knowledgeable about different loan programs and patient in answering your questions. Getting a low rate shouldn’t be the only reason for choosing a lender. Also, look at the cost of the loan, online and person to person access and the loan programs available. 

Complete your application:  The most important step to start your refinance is to complete the loan application.  Once the application is received with the required information you will receive a loan estimate.  The loan estimate document summarizes the details of your loan offer.  At this time you may discuss with your lender on whether to lock your rate or float your rate. If your rate is locked, it won’t change unless the terms of the new loan change. If you let your rate float, it could end up being lower or higher depending on how the market rates change.

Needs List:  Your lender will provide you with a list requesting several documents, such as your W-2 tax forms, paystub, insurance, financial statements, etc.  As soon as these documents are received (all pages) by your lender, the faster the loan process will move.

Get an appraisal:  After receipt of all requested documents and your loan is approved by the Underwriter, the loan team will schedule an appraisal of your home.  The appraiser will visit your home and take notes and pictures. If the appraiser thinks your home is worth more or less than you and your lender expected, the terms of your loan could change.

Loan document signing:  Once you’ve submitted your paperwork and the home appraisal is completed and approved, your loan will be ready for the Closing Disclosure form, which you must review, sign and return to your lender. The form is sent electronically and you may also sign electronically through a secure online portal.  However, if your preference is a hard copy, WPCCU will make arrangements to provide this document has requested. 

Closing:  The final step is known as the closing.  WPCCU will verify your credit and employment again to make sure nothing has changed during the loan process. If everything is in order, your existing home loan will be paid off and your new one will be recorded in the county where your home is located.  The recording fee is part of the closing cost shown on your Settlement (fee) statement received during closing.

If you chose the cash-out refinancing option using the available equity in your home, you will select how you want to receive these funds during the loan signing process.  The cash receipt options available are by check or to have your funds wire transferred to a credit union or financial institution. 

Use our mortgage refi calculator to help you decide whether refinancing is right for you.  Click here >