Home Refinance FAQ

Questions and Answers for Home Refinance

Learn about refinancing your home mortgage. Our FAQs on refinancing cover a variety of topics

Questions and Answers for Home Refinance 101

What are the reasons for refinancing?

There are many benefits to refinancing; it just depends on what your objectives are. Some of the most popular reasons are:

  • To lower your monthly payments by refinancing at a lower interest rate.
  • To convert a portion of your equity into cash by obtaining a new loan for a larger balance than your current loan.
  • To switch from an adjustable rate to the stability of a fixed rate.
  • To consolidate debt by refinancing a higher loan balance and using the cash difference to pay off credit cards, auto loans or other debts.
  • To pay off the mortgage sooner by switching to a shorter term.

Speak to a personal loan consultant to find out if refinancing is right for you. back to top

What are the costs involved in refinancing?

The closing costs, including lender fees, are typically 1% to 2% of the loan amount. In addition, you may choose to pay points in order to get a lower rate, or accept a higher rate in exchange for having the lender pay some or all of your closing costs. back to top

What criteria do lenders use when approving a loan?

Lenders look at three criteria: Capacity, Credit and Collateral.

The lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. They'll also need proof that you have the cash available for down payment and closing costs by verifying funds from sources such as bank accounts, stocks, bonds, mutual funds, sale of an existing home, or gifts from family members.
To determine your credit risk, the lender will look at previous mortgage payment history, rent payment history, credit card use and installment debt payment history. If you pay your bills regularly and on time, you're demonstrating the integrity that lenders are looking for in a borrower.
When you ask for a home loan, you're putting the home itself up for collateral, so the lender will want to know what the home is worth. back to top

How much documentation will I need to supply to verify the information I provided on my application?

Every situation is different. Once you submit your loan application online you'll automatically receive a customized list of the documents you'll need to provide. If you apply over the phone, you'll receive this list within three business days. back to top

What if I can't supply the standard documentation necessary to get a loan?

Some lenders offer special loan features that include low documentation or even no documentation. Call your personal loan consultant for more details. back to top

What is Private Mortgage Insurance (PMI) and why would I need it?

In most cases, if your first mortgage amount is greater than 80% of the property's value, the lender may obtain Private Mortgage Insurance (PMI) to safeguard its investment against the possibility of default. PMI is collected monthly along with the mortgage. Within three days after your loan application is submitted you'll be sent an estimate projecting the amount of the monthly PMI payment. As your equity increases, you may qualify to have PMI removed. There may be ways to finance your home so that PMI is not required. Your loan consultant can provide you with more information. back to top

Do I need to get an appraisal when I refinance?

Yes. However, you may not be required to get an appraisal. Call your loan consultant for details. back to top

What is an impound/escrow account?

Instead of paying large, lump sums to cover the costs of homeowner's insurance and property taxes, these payments are divided into installments which are paid to the lender monthly along with your loan principal and interest. The lender will hold the money in an impound/escrow account and make the payments from the account when they are due. Impound/escrow accounts may be optional, or they may be required by the lender, depending on the location of the property, the size of the loan in relation to the value of the property, and the loan type. back to top

What is homeowner's insurance?

Homeowner's insurance is designed to protect your home. It is also known as hazard insurance, or fire insurance. While the lender requires this coverage, you determine which insurance company will carry the policy. Homeowner's insurance premiums are either paid directly to the insurance agency or by your lender through an impound/escrow account. back to top

How does a refinance closing work?

The refinance closing will be conducted the same way that your loan was closed when you first purchased the property. Soon after your loan is approved your loan consultant will send a list of documents you'll need to bring to the closing. You'll also be sent an Estimated Settlement Statement that tells you the amount, if any, you'll need to bring to closing in the form of a cashier's check, as well as an outline of how the funds from your new loan will be disbursed. If this is a refinance of a primary residence, the loan won't actually fund until three business days after signing the loan documents, due to the borrower's right of rescission. To find out more, see in our Glossary. back to top

Can I get a loan if I'm not a U.S. citizen or if I live outside the country?

Yes. As long as the property you are buying or refinancing is in the United States, you can apply right here online. Some lenders offer special programs for foreign nationals and resident aliens. Call your loan consultant for details. back to top

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