Welcome to Our Learning Center!

Step 1: Shop interest rates.

Step 2: Fill out a complete application.

Step 3: Upload your documentation.

Step 4: E-sign your disclosures.

Step 5: Wait on further instructions from the lender. This is when the majority of the loan processing will take place. The lender may request additional items from you to further document employment, income, or assets. This is when you will obtain a homeowner's insurance policy.

Step 6: Once underwriting is complete we'll begin the closing process of balancing our closing costs with the settlement agent.

Step 7: Once you have been given the final number, contact your bank and coordinate the wire transfer or order the cashier's check.

Step 8: Sign the closing documents. Be flexible. Try and leave your schedule open. Typically, settlement agents are signing multiple borrowers on any given day.

After this point, the lender funds the loan on the scheduled day and the county records the transaction.

Providing that you have submitted everything the lender has asked for, initial approvals typically take about 24 hours and final approvals typically take about 24-48 hours. The entire home buying or refinancing experience usually takes between 15-45 days. Our average home purchase submission to close is just 14 days!

The main items or "meat and potatoes" of your file consists of:

• Government-issued Photo ID
• Proof of income, such as pay stubs and Forms W2.
• Proof of assets, such as bank statements.
• Misc. docs unique to your situation, that the lender may request.

A pre-qualification consists of an application and soft credit check. The pre-qual is good for 30 days because that's the amount of time the soft credit check is good through.

A pre-approval consists of a full application and credit check. This is good for 4 months because that's how long a full credit check is good through.

The principal and interest calculated on your loan are directly tied to your interest rate. The higher the rate, the higher the payment. That said, the amount you borrow, and the term of the loan also affect your payment.

Once you've settled into your long-term career and don't think you'll be moving out of the area anytime soon, then it's a good time to start thinking about buying a house. Here's a general overview of what you'll need:

• 2 years of residency. This includes living rent free arrangements.
• 2 years of employment history. This includes college or university courses.
• 2 years of credit history. Contrary to popular belief, you don't need a ton of credit history to qualify for a mortgage. One good revolving tradeline (like a credit card) and maybe one installment loan (like an auto loan) is typically enough.

As a good rule of thumb, your maximum housing payment will be about 34 - 43% of your gross monthly income, but it also has to do with how much other debt you have. Most lending products will approve a maximum housing payment, plus all other monthly payments, up to about 50% of your gross monthly income.

A mortgage underwriter makes a credit decision on your file. They are the ones who ultimately approve or deny a loan application. Their decision binds the lender to a commitment to lend, so it's a hot seat to be in. Because of this, they hold the keys to the kingdom! Think of them as the judge and jury in a courtroom. Your loan advisor acts as your advocate. Like an attorney, your loan advisor is there to make the case that you should be approved for a loan. The loan file your loan advisor submits is what is reviewed by the underwriter. All documentation provided should serve as evidence to what's listed on the application. They must make an underwriting decision soly on the application and documentation provided. The underwriter never speaks to the borrower.

So your loan has been approved and sent to the closing department. Now what? Next, the closer will reach out the escrow officer or settlement agent and begin balancing all figures. Both parties must make sure their numbers match to the penny, and all closing figures are accurate before heading to the closing table. After that, the escrow agent will reach out to you and schedule a time to sign your documents. After the lender receives all signed documents they can fund the loan, which means they sent the money to the escrow account. You will bring your money to the escrow account as well. Once all monies are received they can close escrow, and send the information to the county for recording.

A fixed rate mortgage means the interest rate is fixed for the life of the loan. It will never rise nor lower. So if it's a 30 year Fixed rate mortgage, the interest rate is the same for 30 years. 

Advantages: you're protected against rising interest rates, and you have a safe and predictable mortgage payment. 

Disadvantages: If rates drop, you have to refinance to take advantage of lower rates, and this typically resets the term which means you're starting over on repaying the interest curve. *Ask us about our flexible, custom loan terms to address this issue.

An adjustable rate mortgage (ARM) is typically fixed for an introductory period, then it's susceptible to market fluctuations after that point. Modern-day ARMs typically have a floor rate (the rate cannot go any lower than x) and a cap rate (the rate cannot go any higher than x). For example, a 5/1 ARM is an interest rate that is fixed for the first 5 years then adjusts every year thereafter, depending on its  corresponding Index and market conditions.

Advantages: You may have a lower introductory rate and save money for several years. If rates go down, your rate automatically goes down. You don't have to refinance. 

Disadvantages: If rates go up, your rate will automatically go up as well, providing you're out of the fixed introductory period.

A Conventional loan is best for borrowers with good credit scores. It is a type of home loan not insured or guaranteed by the government. Conventional loans are either conforming or non-conforming.Conforming mortgages are required to conform to underwriting guidelines and loan limits set by Fannie Mae or Freddie Mac, whereas Non-conforming mortgages have loan amounts higher than the loan limits set by Fannie Mae / Freddie Mac.  Fannie and Freddie are two major government-sponsored entities. You can learn more about them here. 

Conventional loans can offer the best interest rate and lowest fees, which can result in lower monthly payments.  They are typically considered to be the most common type of loan. Conventional loans can be a great option for home buyers who can meet these requirements:

1. Be able to make a down payment.
2. Have a decent credit score (620 or above).
3. Prove a stable income If you meet these requirements, you may be able to qualify for a conventional loan.

FHA loans are backed by the Federal Housing Administration (FHA) and offered by FHA-approved lenders. These loans are generally easier to qualify for than conventional loans and have smaller down payment requirements.  However, you'll owe mortgage insurance premiums (MIPs) for at least 11 years-potentially as long as you have a loan balance.

VA loans are for US Military veterans or surviving spouses only, but there are two major benefits: first, there's no minimum down payment required. The veteran can finance 100% of the purchase. Second, there's no monthly mortgage insurance premium. The Feds guarantee the loan by charging an upfront fee. This fee can be financed.

USDA loans also do not have a minimum required down payment and are available to everyone. Eligible properties must be located in a USDA-zoned rural area. You can check a property's eligibility by visiting their website.

No single mortgage product is better than the other. It's more about which product fits your financial needs best.

Insurance which protects lenders against loss in the event of default by the borrower. This allows lenders to make loans with lower down payments. The federal government offers MI through HUD/FHA, while private entities offer MI for conventional loans. There are different forms of mortgage insurance based on loan type.  This insurance helps protect a lender if a borrower forecloses on their property. Borrowers pay for the mortgage insurance, allowing lenders to grant loans they might not have otherwise. Mortgage insurance may be required on some loans when a down payment is less than 20 percent.

PMI will be eliminated once the loan to value is below 80% for conventional loans, either from making payments or the property value increasing. Historically, the property value usually increases faster than you can pay down the loan, when making regular scheduled payments. When that happens you can apply to have the PMI dropped from the loan, without refinancing, by contacting your current loan servicing company.

A jumbo loan is needed when the loan amount exceeds the conforming loan amount for your area. Check the conforming loan limits here.

A Home Equity Conversion Mortgage (HECM) or "reverse mortgage" as it's more commonly called, is a type of loan that allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. It can also be used to purchase a home. Reverse Mortgage's have changed a lot over the years and many of the more controversial aspects of them have been eliminated. 

Reverse Mortgages are great for individuals who are 62 years or older, have significant equity in their primary residence, are not delinquent on federal debt, and have the financial resources to cover ongoing expenses and property charges.

A balloon mortgage features low monthly payments with a large final payment due at the end of the loan term. It can be useful for short-term financing but may require refinancing or a lump sum payment at maturity. This loan type is only best if you have a plan to pay it off by maturity.

It's the rate you pay to borrow money. Basic parameters to determine Interest rate is your credit score, payment history and the current economic conditions. Mortgage interest is calculated by multiplying the principal amount of the loan by the interest rate and the loan term in years. The total interest can also be calculated using the formula: Principal loan amount x Interest rate x Loan term in years = Interest. Remember, interest is paid on a curve, so it takes an amortization calculator to break down the principal and interest cost of each payment. You can access that calculator here.

An escrow account is created to fund your property taxes and homeowner’s insurance. When the lender includes them in your monthly payments, they will collect money at closing to fund this account. We'll cover this topic some more below.

The loan-to-value (LTV) ratio is calculated by dividing the mortgage balance into the property value or sales price, whichever is less.

Amortization in relation to a mortgage loan refers to the process of gradually paying off the loan through regular, scheduled payments over a set period of time. Each payment you make is split into two parts: principal and interest.

In the early years of the mortgage, a larger portion of your payment goes toward interest, while a smaller portion is applied to the principal. Over time, as the loan balance decreases, more of each payment is applied toward the principal, and less is applied to interest.

amortization allows you to repay a mortgage with regular, consistent payments that cover both the interest and the amount borrowed.

1. Principal: The amount of money borrowed from the lender.
2. Interest: The cost of borrowing that money.

The Debt-to-Income (DTI) ratio is a financial metric that compares your total monthly debt payments to your gross monthly income (before taxes and deductions). It’s used by lenders to assess your ability to manage monthly payments and repay the money you plan to borrow for a mortgage.

Two Types of DTI:

1. Front-End DTI (Housing Ratio): This refers to the percentage of your gross monthly income that goes toward housing costs, including your future mortgage payment, property taxes, homeowners insurance, and other associated costs.
2. Back-End DTI (Total Debt Ratio): This considers all of your monthly debt obligations, including housing costs, credit card payments, car loans, student loans, and other debts.

How DTI Affects Your Mortgage Application:

• Loan Approval: A lower DTI ratio demonstrates to lenders that you have a healthy balance between your income and your debt, making you more likely to be approved for a mortgage. A healthy back-end DTI is 43% or less, though you may be approved at a higher DTI depending on the type of loan and other factors.
• Loan Amount: A lower DTI can also increase the amount you are eligible to borrow since it shows that you have more room in your budget to handle additional debt.
• Interest Rate: Borrowers with a lower DTI may qualify for better interest rates because they are viewed as lower-risk applicants.
• Risk of Denial: A higher DTI ratio may signal that you are overextended, which can increase the risk of being denied a loan or being approved for a smaller loan amount.

Why its Important:

Lenders use DTI to ensure you can comfortably afford your mortgage payments without becoming overburdened by debt. It's an essential part of the mortgage approval process and a key factor in determining how much home you can afford.

An origination fee is the fee the broker or lender charges to originate the loan for you. If the lender is not making a sufficient yield spread on a loan they may charge an origination fee. Likewise, when a wholesale lender is not offering the broker any compensation for the loan, the broker may charge an origination fee. 

Points or discount points are charged when a borrower elects a below-market rate. The lender then charges the borrower the difference between what they will lose on the interest rate when they sell the loan on the secondary market. Most of the time you can select a rate that doesn't come with any additional points, although there have been cases when mortgage securities were so devalued that lenders were charging discount points regardless. So market conditions play a factor as well.

A mortgage refinance is the process of replacing your existing mortgage with a new one, typically with different terms. The new loan pays off the old one, and you then begin making payments on the new mortgage. People usually refinance to take advantage of lower interest rates, change the loan term, switch from an adjustable-rate to a fixed-rate mortgage (or vice versa), or to tap into home equity.

Common Reasons to Refinance:

Lower Interest Rate: One of the most common reasons is to secure a lower interest rate, which can reduce your monthly payments and the total interest paid over the life of the loan.

Shorten the Loan Term: Refinancing from a 30-year mortgage to a 15-year mortgage, for example, can help you pay off your loan faster, though your monthly payments might increase.

Switch Loan Type: You might refinance to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for more predictable monthly payments or vice versa if interest rates are expected to drop.

Cash-Out Refinance: This involves borrowing more than what you currently owe on your mortgage and taking the difference as cash. Homeowners often use this option to access the equity in their homes for things like home improvements, paying off high-interest debts, or covering other major expenses.

Remove Private Mortgage Insurance (PMI): If your home’s value has increased and you now have more than 20% equity in your home, refinancing can allow you to eliminate PMI, which reduces your monthly payments.

Minimum required down payments vary by product type. USDA and VA loans start at zero down. If you're a first time home buyer (haven't owned property in 3 or more years) Conventional financing starts at 3% down, or 5% down for non-first time buyers. FHA financing starts at 3.5% down. Non-conforming loans have different criteria and minimum down requirements can vary.

Several first-time home buyer programs can help make purchasing a home more affordable:

FHA Loans: Backed by the Federal Housing Administration, FHA loans require a down payment as low as 3.5% and have more flexible credit requirements. They're willing to take more risk than the private sector. Most down payment assistance programs are tied into FHA financing. 

State and local programs: Many states offer down payment assistance, grants, or low-interest loans to help first-time homebuyers. To qualify, you’ll typically need to meet income requirements, be purchasing a primary residence, and complete homebuyer education courses. Check with local housing authorities for specific program details.

eLoansUSA.com offers the following programs:

• 3.5% Down Payment Assistance (DPA) Grant: This grant covers the 3.5% minimum down payment required for an FHA loan, with no repayment necessary. While it starts with an above-market interest rate, you become eligible to refinance into better loan terms after making six consecutive on-time monthly payments. 
• 3.5% DPA Second Mortgage: This program provides the 3.5% FHA down payment in the form of a second mortgage. There are no payments or interest on this loan, and it is completely forgiven after 10 years. However, if you refinance or pay off the loan before the 10-year period is over, the balance will be due. The amount owed decreases with each passing month, as 1/120 of the total loan is forgiven monthly, so more is due if you pay it off earlier in the term. 
• Conventional DPA, HomeReady Special Purpose Credit Program: Exclusive to select mortgage brokers only, this DPA offers $15,000 to first time buyers, plus up to a $500 appraisal credit, and up to a $500 home warranty credit.

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Although mortgage financing starts at just a 580 credit score, you can get more favorable terms with better credit. Interest rate pricing works on a sliding scale, so the higher the credit score, the better the interest rate.

A credit score of 620 or higher is typically considered good enough to qualify for a conventional mortgage, but higher scores (above 700) will help you secure better interest rates. For FHA loans, you can often qualify with a score as low as 580 (or 500 with a higher down payment). VA and USDA loans don’t have specific minimum credit score requirements, but lenders usually look for scores of 620 or higher. It’s a good idea to check your credit report and address any issues before applying for a mortgage to ensure you get the best possible terms.

What's considered "bad" credit? The lower the credit score, the higher the risk. Credit scores are based on your debt repayment patterns and habits. 

It's okay if you've missed a couple of credit card payments over the years. It's even okay if you've missed a mortgage payment within the last 12 months, but any more than that and you may have to wait for that adverse credit event to season another 12 months. 

Auto repossessions generally do not stop a mortgage approval, but if you're still owing payments the lender may need to add the payment to your monthly debt obligations regardless if you're actually making payments. The same is true for outstanding collections as well. You can generally have about $2,000 of outstanding non-medical related debts but anymore than that, and the lender may have to calculate monthly payments and add them to your debt obligations. This way, in case any of those past creditors choose to collect against you, the lender has properly hedged that risk. This may reduce the amount you can qualify for. 

Medical-related debts no longer have any bearing on your ability to repay a mortgage.

Deciding whether to rent or buy depends on several factors, including your financial situation, lifestyle, and Deciding whether to rent or buy depends on several factors, including your financial situation, lifestyle, and long-term goals. Buying a home can be a good investment if you plan to stay in one place for a few years, as it builds equity over time. However, renting might be a better choice if you:

• Aren’t sure how long you’ll stay in the area.
• Don’t want the responsibility of home maintenance.
• Need more time to save for a down payment or improve your credit score. It’s essential to compare the costs of renting versus buying, including rent payments, mortgage payments, property taxes, insurance, and maintenance costs.

Property taxes are typically included in your monthly mortgage payment through an escrow account, where your lender collects a portion of the annual tax bill each month. When property taxes increase, your monthly payment will also increase to cover the higher taxes. The amount of property tax you owe is based on the assessed value of your home and the local tax rate. It’s important to budget for potential property tax increases when buying a home.

Homeowners insurance protects your home against damage, theft, and other risks. Most lenders require you to have insurance as a condition of your mortgage. Like property taxes, home insurance premiums are often included in your monthly mortgage payment through an escrow account. The cost of home insurance varies based on factors like the value of your home, location, and coverage limits. Higher insurance premiums will increase your monthly payment, so it’s important to shop around for the best rates.

While it can depend on the mortgage product type, generally the following will affect the interest rate:

• Credit score
• Loan-to-value (LTV)
• Loan amount
• Occupancy type
• Property type
• Location
• Length of rate lock; 15, 30, 60 days, etc.

A rate lock agreement is a written contract between a borrower and a mortgage lender that sets a mortgage loan's interest rate and points. The agreement obligates the lender to make the loan at the specified interest rate if the borrower signs the agreement. A rate lock agreement protects the borrower from interest rate fluctuations that can occur between the time the loan is offered and the time it closes. This is because mortgage interest rates can change frequently, sometimes even hourly. 

Here are some things to know about rate lock agreements: 

• Lock-in period: The time period during which the interest rate is locked in is called the lock-in period. Lock-in periods are typically 30–45 days, but can be shorter or longer. 
• Fees: Some lenders charge a fee to lock in a rate, while others only charge a fee if the lock-in period is extended. 
• Rate lock length: A longer lock-in period can help avoid extension or relock fees if the closing date is delayed. 
• Written agreement: It's important to get the rate lock agreement in writing from the lender. The Loan Estimate or Closing Disclosure will both reflect if the rate has been locked.
• Loan application changes: If there are any changes to the loan application that could affect the rate, the interest rate lock may be revised. 

When to lock-in your interest rate?

Locking the rate is all about timing. For purchase transactions, you want to be sure that you're passed your loan contingency date, and/or have received your appraisal before considering to lock. This is because the risk of cancellation is higher during this period.  For refinance transactions, you can consider locking as soon as you have a rate that you want. Ideally, you'll want to monitor market conditions to identify the opportune moment. Lock-in too early and you risk rates going down even more. Wait to lock-in too late, and you risk rates going up. Don't worry, we'll help you with this! We monitor the loan pipeline and the market daily.

Paying extra on your mortgage, whether through additional monthly payments or lump sums, can:

• Reduce the principal balance faster, which lowers the amount of interest you’ll pay over the life of the loan.
• Shorten the loan term, allowing you to pay off your mortgage early.
• Save money on interest, especially in the early years when most of your payment goes toward interest. Make sure to specify that any extra payments go toward the loan principal, not future interest payments.

Yes in most cases you can pay off your loan early, provided you have made your initial six on-time payments. This is the minimum most lenders require in order to extend financing. There are no pre-payment penalties for conforming loans. Non-conforming loans or private-money loans may come with pre-payment penalties so be sure to check with us first if you're unsure.

Your monthly mortgage payment is made up of four main components, often referred to as PITI:

• Principal: The amount of money you borrowed to buy the home.
• Interest: The cost of borrowing that money.
• Taxes: Property taxes, which may be included in your monthly payment and held in an escrow account.
• Insurance: Homeowners insurance, and possibly PMI, which may also be paid through an escrow account. You can use a mortgage calculator by entering the loan amount, interest rate, loan term, property taxes, and insurance to estimate your monthly payment. If you have an adjustable-rate mortgage, your payment may change over time based on interest rate adjustments.

A mortgage escrow account affects your monthly payment by bundling certain homeownership costs—such as property taxes and homeowners insurance—into your mortgage payment. This ensures that these expenses are paid on time without requiring you to budget for them separately.

Here’s how it works:

• Each month, in addition to your mortgage's principal and interest, your lender collects funds for property taxes and insurance and deposits them into an escrow account.
• When your property taxes or insurance premiums are due, the lender uses the funds from the escrow account to pay them on your behalf.
• Because property taxes and insurance costs can change over time, your monthly escrow payment may increase or decrease, which will impact your overall monthly mortgage payment.

To secure the lowest interest rate on your mortgage, you can:

• Improve your credit score: A higher credit score typically qualifies you for better rates. Aim for a score of at least 700 or higher.
• Make a larger down payment: A down payment of 20% or more can reduce your rate and help you avoid private mortgage insurance (PMI).
• Choose a shorter loan term: A 15-year mortgage usually has a lower interest rate than a 30-year mortgage, but it comes with higher monthly payments.
• Consider discount points: You can purchase discount points to lower your interest rate. One point costs 1% of the loan amount and typically reduces the rate by 0.25%.
• Shop around for lenders: Compare rates from different lenders and consider getting pre-approved to negotiate better terms.

A Home Equity Agreement (HEA), sometimes referred to as a shared equity agreement, allows homeowners to access a portion of their home equity without taking on debt, like with a home equity loan or line of credit. Instead of borrowing money, homeowners sell a percentage of their future home equity to an investor, who gains a return when the property is sold or the agreement is settled.

Here are the pros and cons of a Home Equity Agreement:

Pros of a Home Equity Agreement:

• No Monthly Payments: Unlike traditional loans, a Home Equity Agreement doesn’t require monthly payments or interest. This can be ideal for homeowners who need cash but want to avoid increasing their monthly financial burden.
• Access to Cash Without New Debt: An HEA allows you to access funds without increasing your debt load. This can be helpful if you have high existing debts or want to avoid loan payments that could strain your budget.
• Credit Score Flexibility: Since HEAs don’t involve lending or borrowing, they may be available to homeowners with lower credit scores who might not qualify for traditional loans or home equity lines of credit (HELOCs).
• No Interest Charges: There are no interest charges with an HEA. Instead of paying interest on a loan, you agree to share a percentage of your home’s future appreciation (or depreciation) with the investor.
• Flexible Use of Funds: You can use the funds from a Home Equity Agreement for a variety of purposes—home improvements, debt consolidation, or other financial needs—without restrictions typically imposed by lenders.
• Longer Settlement Timeframe: Home Equity Agreements generally allow a long period (e.g., 10–30 years) before you must settle, giving you flexibility in deciding when to sell or refinance your home.

Cons of a Home Equity Agreement:

1. Sharing Home Appreciation: One of the biggest downsides is that you give up a portion of your home’s future appreciation. If your home’s value increases significantly over time, the investor will claim a larger share of the gains when you sell or refinance the home.
2. Potential Loss on Home Depreciation: If your home’s value decreases, you may still be obligated to settle with the investor based on the original terms. However, some agreements allow the investor to share in the losses if the home’s value drops.
3. Reduced Equity in the Long Term: Since you’re selling a portion of your future equity, you’ll have less ownership stake in your home when it’s time to sell. This could reduce the total profit you make when selling the property.
4. Fees and Settlement Costs: While there are no monthly payments, Home Equity Agreements typically involve fees and closing costs, which could reduce the amount of cash you receive upfront. Additionally, you’ll need to settle the agreement (buy out the investor) if you refinance, sell, or transfer ownership of the home.
5. Limitations on Home Modifications: Some HEA contracts may restrict your ability to significantly renovate or modify your home without notifying or getting approval from the investor. This can limit your flexibility with property improvements that could affect its value.
6. Limited Availability: Home Equity Agreements are not as widely available as traditional loans and are often only offered in specific markets. Also, the agreement terms vary by company, which can make comparison shopping more challenging.

Is a Home Equity Agreement Right for You?

A Home Equity Agreement can be a good option if you need cash and prefer to avoid debt or monthly payments. However, it’s important to weigh the cost of sharing future appreciation against the benefits of upfront access to funds. Homeowners who anticipate significant property value growth might find that a traditional loan or HELOC could be more advantageous in the long run. Thankfully, eLoansUSA.com offers HELOCs and fixed Rate Second Mortgages. Contact us today to learn more!

A home equity line of credit (HELOC) works like a credit card. The lender gives you a line of credit up to either the amount you seek, or the maximum they will lend based on your property's value, whichever is less. Typically, HELOC's offer an interest-only term for the first 10 years, with a balloon payment due in 20 years. They will qualify you based on a fully amortized payment. HELOCs often have adjustable rates as well, but not all of them.

With a HELOC approval, you have the approved maximum line of credit and the balance or drawn amount. The draw is the amount of money you actually borrow at the time of closing. 

Let's say you're approved for a $50,000 line of credit, but you only borrow $25,000 at closing. This leaves you with an additional $25,000 you can draw on at a future date. 

There are fees involved with closing a HELOC and some lenders charge yearly maintanence fees as well.

A Home Equity Loan or a Stand-Alone Second Mortgage is not an open line of credit. You're approved for a set amount and it's a fully amortized payment. The interest rate is typically fixed as well. Fixed rate seconds are often available in 15, 20 and 30 year terms.

There are several different kinds of refinances:

Rate and Term or Limited Cash Out Refinance: With this type of refinance, you may be receiving a lower rate or shorter loan term, or dropping PMI. Perhaps you're looking to remove a co-borrower or co-signer from their obligation. You may not close with receiving more than $2,000 back at closing. 

Divorce or Inheritance: This is where you are buying out either a departing spouse's or testator's share of the equity and removing them from the deed, such as in the case of divorce or inheritance. Be sure your divorce is complete, and to provide us with a copy of the divorce decree or in the case of inheritance, copies of the will or trust. Even though you are accessing equity and paying either the departing spouse or testator off at closing, this is considered a rate and term refinance, meaning there are no negative pricing or interest rate adjustments. 

Cash Out Refinance: This is where you are refinancing in order to increase your loan balance, thereby accessing the available equity in your home. Equity is the difference between what the home appraises for and what you owe. Lenders will typically lend up to 80% of the home's value (less your current loan balance) on a cash out refinance. You will get a current market interest rate as well. Cash out refinances are more expensive than rate and terms refinance because there are negative pricing and/or interest rate adjustments which result in a higher interest rate. This is seen to offset the additional risk the lender is taking on by increasing your loan balance. FHA or VA 

Streamline Refinance: As the name suggests, the purpose of these refinance is to lower the interest rate and/or term of the loan in less time, and with less documentation. This is only when you're refinancing from an FHA or VA loan into another FHA or VA loan. You cannot take any additional cash out on Streamlines.

The right time to refinance your mortgage depends on several factors. Here are some key situations when refinancing could be beneficial:

1. Interest Rates Have Dropped

One of the most common reasons to refinance is when mortgage interest rates have decreased. If current rates are lower than when you originally took out your loan, refinancing can:

• Reduce your monthly payments by lowering your interest rate.
• Save you money on interest over the life of the loan.

A general rule of thumb is to consider refinancing if the new interest rate is at least 0.5% to 1% lower than your current rate.

2. Your Credit Score Has Improved

If your credit score has increased significantly since you first took out your mortgage, you may qualify for a lower interest rate. This can make refinancing advantageous by lowering your payments or allowing you to shorten the loan term without drastically increasing your monthly payment.

3. You Want to Shorten Your Loan Term

If you’re in a position to afford higher monthly payments, refinancing from a 30-year mortgage to a shorter term mortgage, like a 15 year loan can:

• Help you pay off your mortgage faster.
• Save on interest, as shorter-term loans usually come with lower interest rates.

However, this will increase your monthly payment, so you need to ensure it fits within your budget.

4. You Want to Switch from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage

If you currently have an adjustable-rate mortgage (ARM) and are nearing the end of the fixed-rate period, refinancing to a fixed-rate mortgage can provide stability. This is particularly beneficial if you expect interest rates to rise in the near future and want to lock in a consistent monthly payment.

5. You Want to Tap Into Your Home Equity (Cash-Out Refinance)

A cash-out refinance allows you to take out a new mortgage for more than what you currently owe and pocket the difference in cash. This can be helpful for:

• Home improvements.
• Debt consolidation.
• Buying an investment property.
• Paying for college.
• Covering other significant expenses.

Just be mindful that this increases your loan balance and could raise your monthly payments.

6. You Want to Eliminate Private Mortgage Insurance (PMI)

If you originally put down less than 20% and are paying Private Mortgage Insurance (PMI), refinancing could help you eliminate this cost once your home’s value has increased, and you have at least 20% equity. This can reduce your monthly payment.

7. Your Financial Situation Has Changed

If your income has decreased or you’re struggling with your current payments, refinancing to a longer loan term (e.g., 30 years) could lower your monthly payments and provide some financial relief. However, this means you’ll pay more interest over the life of the loan.

Break-Even Points

Refinancing comes with closing costs. To determine if refinancing is worth it, calculate the break-even point—the time it takes for your savings from lower payments to cover the cost of refinancing. If you plan to stay in your home beyond this point, refinancing can be a smart move. Always consider closing costs and calculate how long it will take to break even before making the decision to refinance.