Reasons Why Homeowners Refinance Mortgage Loans

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This GUIDE covers the reasons why homeowners refinance their mortgage loans. In today’s falling interest rate environment, we have seen a flood in refinance transactions. Despite the coronavirus economic recession in the nation, the housing market is booming. With historically high mortgage rates, many homeowners can take advantage of the various refinance loan programs available.

Home prices are skyrocketing to record levels. Due to rising home prices, the Federal Housing Finance Agency increased conforming loan limits for the seventh year.

Conforming loan limits for 2023 are now at $726,300. HUD, the parent of FHA, followed in the FHFA’s lead and announced the loan limit increase on FHA loans to $472,030 for 2023. There are many different reasons why Americans choose to refinance their homes. In this blog, We will detail the refinance process, explain why people refinance, and explain what net tangible benefit means. In the following paragraphs, we will cover the reasons why homeowners refinance.

Reasons Why Homeowners Refinance Their Mortgage Loans

There are many different ways to refinance your home. We offer Conventional, FHA, VA, USDA, and NON-QM refinance mortgages. With all these available programs, how do you know which is best for you?  The answer is simple. Your loan officer will determine which loan product best suits your refinance goals. Your loan officer will put you in the best-fitting refinance product based on your credit score and equity position.

What Are The Main Reasons Why Homeowners Refinance and How Does The Process Work

What are the main reasons why homeowners refinance. How does the refinance process work? It is very similar to a purchase transaction but with less stress. You already own your home; no moving is involved, so the strict time frame requirements are not there. When you are buying a home, there are more moving parts. The refinance process begins when you complete an online application. From there, you will send your loan officer the proper documentation. See below:

• Driver’s License
• Last 30 Days of Pay Stubs
• Last Two Years Tax Returns
• Last Two Years, W2 or 1099s
• Mortgage Statement
• Homeowners Insurance Policy

Steps After Completing Mortgage Application

Once your loan officer has your application, they can verify your credit report. Your loan officer will qualify you with the credit report and the documentation above. Once you and your loan officer agree on which mortgage product is best for you, the loan package will be disclosed.

Just like a purchase transaction, you will electronically sign the loan package. There may be a few additional documents that require your ink signature. Once these documents are received, the lender will order your appraisal.

The appraisal value is incredibly important for refinance transactions. Gustan Cho Associates has many refinance loan options available without LENDER OVERLAYS. With many homeowners with high home equity, borrowers can use cash-out refinance loans.

Importance of The Home Appraisal 

The appraised value will give the lender the baseline for structuring your loan. During the appraisal process, your file will go through underwriting.. The underwriter will let us know what additional documents, if any, are needed to close on the refinance. At least three days before closing, you will be sent a CLOSING DISCLOSURE.

The Closing Disclosure or CD will detail the final figures for your refinance transaction. Three days after signing that document, you can then legally close your refinance

Most refinance transactions are closed in the comfort of your home or with a mobile notary. If this is a primary residence, there is a three-day RIGHT TO RESCISSION waiting period before your loan will be funded. If this is a second home or an investment property, your loan will be funded without this three-day right to rescission-period. That’s it!! We are experts in this process and are here to help you!

The Top Reasons Why Homeowners Refinance

There are many reasons why Americans refinance their properties. Most of the time, they are either taking cash out of their property or getting a lower interest rate on their mortgage. A CASH-OUT REFINANCE  mortgage can be used for paying off high-interest Consumer Debt, Home Improvements, or investment opportunities.

A RATE AND TERM REFINANCE gives you a lower interest rate or a shorter term to pay off your mortgage, saving you money. Other examples include removing a co-borrower or non-occupying co-borrower from the mortgage.

Usually, this happens when the person who co-signed on your mortgage needs to buy a home for themselves. The only way to accomplish this is with a true refinance. Other circumstances include divorce or family separation. If you are interested in refinancing your property, call Gustan Cho Associates, Inc. at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

Meeting The Net Tangible Benefit Test

Stricter regulations were put on refinance transactions during the real estate crash 2008. Now, you must pass a net tangible benefit to refinance your mortgage. Meaning there has to be a benefit to complete the transaction.  Before these regulations were implemented, Americans were refinancing their homes like crazy. 

What Are Examples of Net Tangible Benefits For Borrowers

The net tangible benefit guarantees that you will recoup the cost of the refinance transaction in a reasonable amount of time. A few examples of net tangible benefits are:

• Obtaining a lower interest rate
• Obtaining a lower monthly payment, including principal, interest, taxes, and insurance
• Obtaining a shorter mortgage term (EXAMPLE: refinancing from a 30-year to a 15-year)
• Refinancing from an adjustable-rate mortgage to a fixed-rate mortgage
• Eliminating a balloon payment
• Eliminating a negative amortization feature
• Receiving cash out
• Eliminating mortgage insurance

The list goes on and on, but you can see many ways to pass the net tangible benefit requirement. These laws were put in place to protect the American people.

Qualifying For a Mortgage With a Lender With No Overlays

If you feel a refinance will benefit you and your family, please call us directly. Gustan Cho Associates, Inc. is a mortgage company licensed in multiple states without lender overlays on government and conventional loans. If another lender has turned you down, don’t hesitate to contact us.

Most lenders do not offer the loan products that we do. NON-QM refinance loans are more popular than ever!

Call us today for a one-on-one consultation and receive custom refinance options. We look forward to hearing from you. Feel free to contact us at 800-900-8569 or text us for a faster response seven days a week. Or email us at gcho@gustancho.com.