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Mortgage Refinance FAQs

In today’s complicated financial world, there are many different types of mortgage loan and mortgage refinancing options.  This can be quite confusing and you may have some questions about some of them.  Let’s take a look at a few of the most common mortgage refinance questions that people ask, and their answers.

1. What really is a mortgage refinance? First of all, when a homeowner buys a home, the mortgage payment comes with it—a monthly stressor that continues even some time after a mortgage purchase. To answer this, the first of the mortgage refinance FAQs, it must be understood that the initial payment of a mortgage is not always a locked-in deal that forces your bank account deeper and deeper into the red. A mortgage refinance allows you to essentially pay off the mortgage you currently have by taking out a new one. The new mortgage, or the “refinanced” version of your mortgage will usually offer a lower interest rate. Basically, you are restructuring the mortgage loan you originally had, in order to make it a payment more conducive to the actual income and lifestyle you currently have.

2.  What are the main factors necessary for a person to qualify for a mortgage refinance?  Your lender will consider many different areas when qualifying you for mortgage refinancing.  They will look at your credit score and history, the current value of your home, your income, and any assets that you may have.  If the value of your home is not more than your current mortgage loan, you may not be able to do a mortgage refinance.  

3.  Is there more than one type of mortgage refinance?  There are several different types of loans and features when doing a mortgage refinance.  You may need to opt for a total refinance that pays off your current loan and extends the term of the loan to lower your payments.  You may want a cash-out refinance so you have money for that remodeling project, or some other current expense.  A Home Equity Line of Credit (HELOC) may be a good option for you.  A HELOC can be a revolving credit account, where you can withdraw only what you need when you need it.   

4. What is "bad credit"?  Bad credit may include a poor credit score, but it is mainly a credit history that has a number of missed and late payments over a period of time.  Even if you have poor or bad credit, you can still find options if you need to refinance your home, such as a bad credit mortgage refinance.  There are three main credit score companies that keep track of your histories and give you a credit score.   

5. If you have bad credit, can you refinance your mortgage?  Bad credit mortgage refinancing is an option that is available to people whose credit history has some problems.  The credit history is not the only thing that is considered by the mortgage lenders.  Many people in the early 2000s took out Adjustable Rate Mortgages (ARMs).  There are many that have missed some of their mortgage payments.  There are currently some programs that will help these people to refinance their mortgage and lower the monthly payments.  If you find yourself in this situation, these programs would help you stay in your home and avoid foreclosure.  You may be able to get a bad credit mortgage through FHA and VA programs. 

There are many different factors that go into a mortgage refinance and many questions that people may have.  If you find a reputable and knowledgeable mortgage loan officer, they should be able to analyze your current situation and help you decide which type of loan and features will be the best fit for your needs.   

6. What are the requirements for a mortgage refinance? First and foremost, the answer to the mortgage refinance FAQs like this one is this: well-established credit. The history you have of your credit will do much to determine whether or not you will be able to receive the refinancing you need on your mortgage. However, because you were already approved for a mortgage loan in the past, you likely will have what it takes. Beside the credit history, proof of employment is also required. Be sure to have documentation presenting this, as well as the income level you are currently on.

7. Are there advantages to mortgage refinancing? Of course! The point of refinancing a mortgage is making the payments smaller and easier to handle. Having a lower interest rate will aid greatly in your monthly endeavor to own a home. You will also have the ability to pay your loan over a period of more or less time than was originally planned. There is also the option of cashing out equity in your home in order to pay other things like credit card debt.

There are many advantages to refinancing a home. For this reason, it is important to ask some of those mortgage refinance FAQs, so that you can be sure of what needs to happen for you to establish your home, and keep it as a wonderful place to build a family.