Refinancing Requirements

Usually, homeowners that refinance their mortgage typically fall into 3 main categories: they refinance to lower their mortgage rate, for cash-out and for a shorter mortgage. This is typical in a Denver refinance mortgage. 

Other reasons explore on debt consolidation (the homeowner have several ongoing debts being paid), improved FICO credit score and several others. Sound financial planning and home-ownership can translate into savings, im0roved quality of their home and an increase in their home equity position.

Where to begin

The first important task is to gauge your loan rate, its present terms, and the remaining balance. You need to know your current mortgage rate (to compare to the planned one), and the years left on your current term.

You would need to know your current balance and whether you plan to pay off your home loan with a Denver refinance mortgage. Also included here is the current value of your home in today’s market.

You have to determine your reasons for refinancing. This will help you in getting a home lender who is best suited for your goals you want to do. Speaking to an experienced loan officer can help you understand your financial profile and goals.

Important notes

Many homeowners who want to refinance are looking for a lower mortgage rate. They might be surprised to learn that they can also shorten their term without making a big impact on their mortgage payments.

Your reason for refinancing will help the loan officer with better suggested options that best fits your case.

Sometimes, a home owner’s only concern is to lower the monthly mortgage payments and still go for the 30-year term.

However, a shorter term can sometime still lower your payments. Cash-out purposes will increase your loan amount but can still lower your monthly amortization. This is dependent on how much lower a refinance rare is when compared to your current loan rate.

More reasons

Homeowners can have more reasons and goals for refinancing. Increased home value could allow for the removal of conventional mortgage insurance. Divorce can also create a reason to have one homeowner removed from the mortgage.

Sometimes, homeowners need cash to make home improvements. They may need it too for paying a child’s college education. An improved FICO credit score might also be a good reason to refinance.

Requirements

Lenders vary on what they require. This is usually after they have evaluated your information.  You may be eligible for a streamline refinance which would speed up the process and reduce the required documentation.

You will need your proof of income which will generally include whichever of the flowing to apply in your case: last 30days pay stubs, W-2 or I-9 forms for the past 2 years, tax returns for the last 2 years, commissions and bonuses for the last 2 years, alimony, and child support payments.

Needed too are your investment income records, rental income and pension or retirement income (all of which are dependent on feasibility).

The requirements for business owners (or self-employed individuals) are a bit more complicated. They may be asked to provide profit-and-loss statements, balance sheets and some various other documents.

Lending and Processing Mortgage Loans

The Colorado mortgage lender, like most mortgage lenders, is either a bank or a financial company that lends money to borrowers who want to purchase a home. The lender also acts as both the loan provider and the servicer of the mortgage.

Both the lender and the loan servicer have specific policies and processes that they are required to follow, and both are regulated by the Federal government.

Mortgage transaction

Most people will have to interact with the Colorado mortgage lender, whether a bank or a credit union, when they apply for a mortgage. The representative of the lender will have to educate the borrower on the many types of mortgages, the interest rates, and how much to spend for the down payment.

For his part, the borrower needs to submit proof of income like pay stubs and other financial information when applying for the loan.

The lender will also have to perform his duties through credit checks, a review of the borrower’s credit history, the number of accounts open, the amount of debt and payment history.

Data check

If the borrower has some negative information on his credit report, like late payments and such, this information will impact on odds of approval and the interest rate charged by the lender.

After being approved, the lender will host the closing. This is when the paperwork is signed and the mortgage is legally put on the books.

Loan life

During the life span (time period) of the mortgage loan, the borrower will owe the lender the amount borrowed to buy the home, plus the interest of such loan.

Every monthly payment will go down to paying down the mortgage. A portion of each payment will pay out the interest owed on the loan.  The other portion of the payment is set to paying the principal or the original amount borrowed. 

Sometimes, there are instances when the lender hires another company to handle all the payment processing once the loan is booked. These are the mortgage service companies.

Mortgage servicer

This is an outside company that helps the processing of the loan, which includes making sure the loan is awarded to the borrower and that the borrower shall apply the loan to its intended purchase.

The processing also includes tracking loan payments, sending reminder notices for missed payment, and filing foreclosure documents should the loan is in default. This happens when the payments have not been paid for a length of time and unlikely to be paid.

The loan shall be in foreclosure. This is the process when the bank takes over the possession of the house and resells it to recoup any losses from the loan.

Lender and servicer

Mortgage lenders can also be the mortgage servicer. This happens if the lender is set up to handle deposits like a bank or a financing company. 

If the lender cannot hold deposits, the mortgage servicing company shall do the needed work. (Every State has it own rules on how mortgage loans are serviced and also the roles of banks and service companies.)