Refinancing – what’s involved?

Many of you have probably heard through the media or through friends and family that mortgage interest rates are at historic lows. While refinancing may not be an option for everyone, you may be asking yourself if it would be worthwhile to refinance your mortgage and wondering what steps need to be taken.

The general rule of thumb has been that if you can lower your interest rate by 1% it makes sense to refinance. When deciding whether or not to refinance, you should consider how many months of lower payments it will take to recoup the closing costs. If you’re not sure, you can contact any of the lenders at Intercity and we would be happy to review your options with you.

If you decide you want to refinance, here are the pieces of information your lender will need to start the process:

1. New loan application: Even though you already have a mortgage, you will need to complete a totally new loan application for the refinancing. You can get this form from your lender.

2. Verify income: To verify income, we will need one month of current paystubs and the last two years of your W-2s and Federal tax returns. (If you are self-employed, we will need the last three years of tax returns.)

3. Property Appraisal: As the real estate market has been fluctuating, a new appraisal of your property will need to be done to determine the current market value of your home.

Once the appraisal is completed and the income information has been documented, the refinance is ready to be approved (provided you have approved credit). There are many factors that are taken into consideration when approving a fixed-rate mortgage. Your credit score, loan-to-value and debt-to-income ratios are all factors that will determine eligibility.

Once the underwriter has received all the required information, it is reviewed and deemed eligible for a fixed-rate mortgage. Currently, refinancing a mortgage takes 2-3 weeks to complete. The bottom line is that if you qualify for refinancing, the savings on your mortgage can be significant!