Rate and Term Refinance

With a Rate and Term Refinance, you exchange your old mortgage for a new one, hopefully leaving you in a better financial position than before.  By doing so, you can accomplish one or more of the following objectives:

-Reduce your monthly payment.

-Decrease the amount of interest you pay over the life of the loan.

-Build equity in your home faster.

-Pay your home off sooner.

-Change the type of loan you have (i.e., from an adjustable to a fixed-rate loan or from an FHA to a conventional loan); or

-Eliminate mortgage insurance.  

It is important to note that you can refinance a mortgage using a Conventional, FHA, VA loan.

Rate and Term Refinance Eligibility. 

• Proof of verifiable income and employment history.  Applicants must be able to prove sufficient income to support the new house payment and other qualifying debt (see DTI requirements below). In most cases, a two-year history of employment is also required.  There are a few instances where the two-year employment requirement is not needed (such as an individual who just graduated from school, a retiree or someone whose income is derived from disability).

• A Minimum Credit Score of 580.  In general, you should strive for a credit score of 640 or above when applying for a Rate and Term Refinance using a Conventional mortgage. If you are refinancing using FHA or VA, you could be approved with a score as low as 580. As with any mortgage loan, the higher your credit score, the lower your interest rate.

• Debt-to-Income Ratio (DTI) Requirement. Debt-to-Income requirements are the same as for a Purchase option.  For conventional refinances, the maximum DTI requirement is 43%; for FHA refinances your DTI may go up to 49% and for a VA refinance, your DTI must be 41% or less. 
• Mortgage Insurance Requirement.  Regardless as the loan product, if you have less than 20% equity in your home when you refinance your mortgage, you will be required to have Mortgage Insurance.
• Eligible Properties.  Using a Rate and Term refinance, you can refinance all types of properties including primary residences, vacation homes, and investment properties.

Applying for a Rate and Term Refinance

It’s easy. To get started, you will want to gather the following (that applies to you):

1. Proof of income and employment (pay stubs, tax returns, W-2 statements, retirement statements Social Security statements, child support and alimony documentation etc.).
2. Documentation of financial assets (bank statements, 401k statement, document of income from investments, etc.).
3. Most recent Pay off for your current mortgage.
4. Identity information such as your unexpired Driver’s License and Social Security card.

If you have questions and would like to speak to someone right away, give us a call at 832.946.8400.