REFINANCE GUIDE

Learn how refinancing can help you save money.

Presented by:

PRIDE MORTGAES, INC.

Residential Housing Mortgages.

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Table of Contents

v Chapter One: Ready to Refinance.

v Chapter Two: Exploring your Refinance Options.

v Chapter Three: Applying for Refinance.

v Chapter Four: Appraisals and Underwriting.

v Chapter Five: Closing your Refinance.

v Chapter Six: Managing your Mortgage Payments.

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Chapter OneReady to Refinance.

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Reasons to RefinancevThe most common reasons for refinancing a mortgage are to take cash out, get a

lower payment or shorten your mortgage term

1. Take cash out: With a cash-out refinance, you refinance for a higher loan amount than what

you owe and pocket the difference.

2. Get a lower payment: There are a few ways you can lower your payment by refinancing. First,

you may be able to refinance with a lower rate. Second, you could refinance to get rid of

mortgage insurance. Third, you can get a lower payment by changing your mortgage term

3. Shorten your mortgage: Shortening your mortgage term is a great way to save money on

interest. Often, shortening your term means you'll receive a better interest rate. A better interest

rate and fewer years of payments mean big interest savings in the long run

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Credit Score

vOnline resources make it easy to find out your credit score for free. Knowing your credit score will help you understand what mortgage refinance options you could be eligible for.

Monthly Mortgage Payments

vKnowing how monthly mortgage payments fit into your budget will help you evaluate your options. It's a good idea to know how much wiggle room you have in your budget for a higher monthly payment.

Home Value

vThe best way to estimate home value is to check sale prices of similar homes nearby. Knowing the value of your home can tell you how much equity you have. (subtract your current mortgage balance from the estimated value of your home)

Debt-to-Income Ratio

(DTI)

vDTI is all your monthly debt payments divided by your gross monthly income. Most lenders require a DTI of 50% or lower, and the maximum DTI varies by the type of loan you get.

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Things to be Evaluated…

Chapter TwoExploring your Refinance

Options.

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Lower Paymenta. Lower interest rate: ARM rates are typically lower than fixed rates because of the risk that your

rate could increase after the initial fixed-rate period is over

§ A lower rate will shrink the interest portion of your monthly payment, but many factors –

such as your term, taxes and insurance – affect how much you're required to pay each

month

b. Change mortgage term: Changing your mortgage term could be right for you. Lengthening

your mortgage term allows you to stretch your payments out, which makes each payment smaller

§ Going from a 15-year term to a 30-year term, for instance, is a great way to lower your

payment

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Take Cash OutvIf you're taking cash out with a goal of becoming

debt-free, a shorter term could be a better choice

vIf you're simply looking to take out as much cash

as possible, a 30-year loan is probably your best

bet

v An FHA loan is less expensive than a conventional

loan

§ However, if you already have a conventional loan,

refinancing into another conventional loan could

be the right choice

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Shorten Your Termv A shorter term usually has a lower interest rate, and since there are

fewer payments, you'll pay significantly less interest overall.

vA conventional loan is a great choice for those with good credit.

§ If you're a service member or veteran, a VA loan is almost always your

best choice.

§ Talk with your lender to see which loan option makes shortening your

term the most affordable.

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Chapter ThreeApplying to Refinance.

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Choosing a Lender

Will you service my loan after closing, or will you sell my loan

to another company?

What’s your availability?

What are your rates and fees?

What is your client satisfaction rating?

Can I complete the process online?

How much time does the process take?

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Documents Your Lender Will Require

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1. Two most recent pay stubs

2. Two most recent W-2’s

3. Most recent two months of bank statements

v If you're self-employed, you'll have to provide a few more documents to demonstrate your income.

Some lenders will ask to see your entire tax return so they can see the exact amount of cash in and cash

out.

The Costs of a Refinance

vApplication fee This fee will be due even if your loan is denied

vAppraisal fee You'll likely have to get an appraisal so your lender has an accurate and

updated value for your property

vInspection fee Certain inspections may be required based on the type of loan you're

getting

vAttorney review and closing fee This fee covers the costs of the lawyer who

conducts the closing for the lender

vTitle search and insurance Required to make sure your home has no liens and that

you are the rightful owner. You’ll also pay for title insurance (one-time cost)13

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v When you apply to refinance, you'll receive a Loan Estimate that provides an estimate of the fees and costs of your loan. Prior to closing, your lender will send you a Closing Disclosure, which details your final numbers and lets you see exactly what you're paying for.

The Costs of a Refinance

Length of the Refinance Process

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A typical refinance will take anywhere from 30 to 45 days, but there are many variables that can lengthen the process…Your lender works with a variety of third parties – such as appraisers, inspectors and title companies – to get your loan closed.

Any financial or other life changes on your part can also lengthen the process.

Once you've completed your mortgage application, you'll have the option to lock your mortgage rate…

Most lenders allow you to lock your rate for 30, 45 or 60 days, but keep in mind that you may have to pay a fee if you need to extend the timeframe.

Chapter FourThe Underwriting

Process.

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The Underwriting ProcessvThis is where the underwriter checks all the details on your application and supporting

documentation to make sure everything's accurate and fulfills the necessary guidelines

§ Typically takes a week or two, but any third parties involved in the underwriting process, such as

the appraiser, can slow this down

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How the Appraisal Can Impact RefinancevYou'll need an appraisal to confirm the value of

your property

§ The appraiser will inspect your home and

compare it to similar, recently sold homes in

your area to determine an opinion of value

§ If your home has been appraised in the last 120

days, you may be able to have the appraisal

waived

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Low Home Appraisal vThese are some options you might have if your appraisal comes back low:

1. Decrease the amount of the refinance: In some cases, you might have to bring cash to

the table to cover the difference between the loan amount and property value. In other

cases, such as with a cash-out refinance, you might be able to just lower the loan

amount.

2. Cancel the refinance: A low home value might mean that refinancing isn't right for you

at this time

vIf you cancel the refinance as a result of a low appraisal value, you may still have to pay

the appraisal fees and any other required lender fees

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Chapter FiveClosing your Refinance.

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What to Bring to Closing

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1. ID

(Driver’s License, Passport, etc.)

2. Cashier’s Check 3. Closing Disclosure

3. List of Key Contacts

(Agent, Lawyer, etc.)

Who Should Attend ClosingvAnyone who's going to be on the

loan will need to attend closing. It's possible to close on your mortgage if you aren't able to make it in person, but you'll need to grant someone power of attorney. You can also expect a representative from the title company to be at closing, and some states require a witness to be present as well.

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Refinance Closing CostsvBefore you close, your lender will provide you with a Closing Disclosure that will

give you a line-by-line breakdown of any fees you'll have to pay at closing, as well

as your loan and payment details

§ You'll have at least three days to review the Closing Disclosure before closing

§ Regardless of whether you decide to backout, you'll likely still have to pay for services

you've already received

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Chapter SixManaging your

Mortgage Payments.

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What Happens to your Escrow Acct. vIf you had an escrow account on your old loan, that money could come back to you in one

of these ways:

1. You could receive a check for your escrow funds from the lender of your old loan. If

you're receiving these funds by check, you can expect to get them within 30 days

2. Your escrow funds will be used as part of the payoff for your old loan. This means a

couple of things. First, it will reduce the total amount that needs to be paid off. Second,

if you're getting an escrow account on your new loan, your old escrow funds can be

transferred to your new loan

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Making Additional PaymentsvYou can save on interest and reduce the length of your loan by making additional

payments or paying extra on your monthly payment. Making just one extra

payment a year allows you to save a significant amount on interest over the life of

your loan

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QUESTIONS?

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