Refinancing Your Mortgage

There are many options for managing closing costs for different kinds of refinance loans. Regardless of whether or not you receive closing credits from your lender, you often have the option of folding closing costs into your loan to avoid having to put up cash at closing. You may hear that 1.5% of your loan amount is a good rule of thumb for closing costs but it is always best to ask your loan officer about all your options.

Pennymac also offers a refinance calculator to see if refinancing your home can help you lower your monthly payment or consolidate your debt. This is a great place to start as you weigh costs against benefits.

Many refinance loans can take 30-45 days to close but there are lots of exceptions if your finances are complex or you’re refinancing at a particularly busy time of year.

There are, however, steps you can take to limit your exposure to delays. Much of the documentation that you’ll need to provide for processing can be determined as soon as you know what kind of loan you will be applying for. Collecting and scanning documents like tax returns and income verification is a good start and can save you time during your application process.

Equity is the appraised value of your home minus the amount you still owe on your loan. This is an important factor for refinance loans that require a minimum loan-to-value (LTV) percentage and for cash out refinances where you want to take a specific amount of cash out of your existing equity.

If you’re interested in estimating the current equity in your home, Pennymac has created a Home Value Estimator to help. To determine your estimated equity, just subtract the outstanding balance of your loan from the estimated value of your property and you will have a great starting point for determining what types of refinance loans will work for you.

Your documentation allows underwriters to verify that you’re a good fit for the loan option you’ve selected. Here is a list of some of the most common documents that your loan officer may ask for:

• Proof of income – You will be asked to provide pay stubs (typically for the past 30 days) in order to verify income. Self-employed borrowers may be asked for different documentation.
• Copy of homeowners insurance – Verifying that your property is insured, or will be insured, is important to all lenders.
• Copies of your W-2 forms – Providing your W-2 forms will give your lender a much broader picture of your financial picture.
• Copies of asset information – Lenders are required to verify that you have the funds available to cover the various expenses of the loan. You may be asked for checking, savings and 401(k) statements, as well as investment records for mutual funds or stocks.
• Copy of title insurance – A copy of your title insurance is important to help your lender verify your taxes, names on the title and the legal description of the property.

Your lender will also need to pull your credit report as a part of the refinance process, so have your Social Security number handy when it’s time to apply.

In many cases, yes. As rates have dropped and home values have risen, many homeowners have an opportunity to remove their PMI while reducing their overall monthly payment. Talk to your loan officer about the specific requirements of the loan products you qualify for.

Keep in mind that many loans have a ‘seasoning requirement’ that requires you to wait at least 2 years before you can refinance to get rid of PMI. So if your loan is less than 2 years old, you can request that your PMI be removed with a new refinance but you’re not guaranteed to get approval.

There are many loan types that cater to borrowers with sub-optimal credit. The best way to find out about all your options is to let a loan officer pull your credit and explain the benefits of different programs to you.

Streamline refinancing was created to expedite the process of obtaining a new loan by referencing existing paperwork and data on a borrower. The process is not only faster but also easier for the borrower, since it can be completed without the full documentation required on standard conventional loans.

Opting for a streamline refinance can be a viable option for borrowers who want a lower interest rate or need to transition from an adjustable-rate mortgage (ARM) to a fixed-rate loan. Both the FHA and VA offer beneficial streamline refinancing programs to qualifying borrowers.