Refinancing – When and How to Do It
Have you been thinking about refinancing? Are you confused about if you should refinance? Or do you just need to know how to refinance and what’s involved? Well, I’m a Realtor, not a mortgage professional, however, I can give you an overview and things to expect when refinancing.
Typically, you want to refinance when the current interest rate you qualify for is lower than the one you currently have. Notice what I just said. Just because you had some low interest rates pop up in an ad on your Google feed does not mean that is the rate you would be getting or that there won’t be other charges to inflate the rate or overall cost. This is where talking to a trusted, local professional can be very helpful. I am not slamming online companies. I have actually had some good experiences with them. I have also had some bad experiences with them – but I have had bad experiences with local banks as well. Anyway, I digress. However you go about checking a rate, make sure to ask all the questions:
- What interest rate do I qualify for?
- What type of loan is that based on?
- Does that loan and rate assume I am paying points?
- What are the other fees associated?
- How much will I need to bring to closing?
If you remember the loan process when you purchased your house, that is the same thing to expect with a refinance. The only thing I have experienced that is slightly different is that you do not have a hard closing date to shoot for so you will only have a general timeframe of when you will close. The only true date to consider is that your interest rate is only locked for a certain period of time.
There are typically several people you will communicate with through the process. A loan officer, processor, an underwriter, a title company, and perhaps even an assistant and someone from the corporate office. In a perfect world, all of the necessary paperwork and documentation would be requested of you immediately upon applying for the loan. The reality is, that is rarely or never the case. As the processor and underwriter go through the process of gathering and approving, there will likely be other documentation they will need to make the final decision and approval. When any of these people ask you for any kind of document, feel free to ask questions, however, chances are, if you want the loan, you will have to provide the information they request.
You will have an appraisal done on the property so be prepared to be available to allow access to the appraiser when the time comes. The bank will order that appraisal from a pool of appraisers that they have approved. You do not get to choose. One thing you are able to choose, however, that a lot of consumers are not aware of is the title company or real estate attorney you wish to close the loan. You do not have to use the person the mortgage company suggests or writes in on the paperwork. Simply tell your loan officer who you want to use in the beginning of the processor so the title company or real estate attorney can be notified immediately and start their title search, etc. When closing the loan, most of the time you will skip the next month’s mortgage payment because you pay the interest at closing. A good tip is to either pay off/down some other bills or debt with that money or go ahead and make that payment on your mortgage and note all of it to go to the principal, thus paying off the loan that much quicker.
I have found that the process can be quite tedious at times and frustrating at others, however, if the right expectations are set, you will, hopefully, not be surprised and be able to get through virtually unscathed and with a lower mortgage payment.
Michelle Froedge is a residential Realtor and Principal Broker in the Greater Nashville and Williamson County areas of Tennessee. “Mom” to four-legged fur baby, Tyler, Auntie to Zelamie, she is a vegetarian and sings in her spare time. Michelle has lived in Nashville and Franklin since 1997 and has been selling homes since 2004.