What You Will Learn
- What documents are required for a mortgage refinance
- Determine your goals for refinancing
- How to prepare for an home appraisal
Are you thinking about refinancing your mortgage? It could be to take advantage of better interest rates for mortgage lending than when you initially purchased your home. It might be that your business or investment performance is exceeding your initial expectations. Or, you may want to access the equity you have for second home or another business venture. A mortgage refi is a possible solution
Although lenders like MBANC will take care of your application from end to end, there are things you can do to prepare for a refinance in advance.
Set a goal for refinance
Are you looking to consolidate high-interest debt into a lower-interest mortgage? Maybe you’d like to increase your payment amount to pay off your mortgage sooner. Or like many entrepreneurs and investors, it could be to access equity for a lucrative new idea. Whatever he motivation, establishing a goal is the first step in the process.
Analyze your plans to determine what would ideally accomplish your goal. A lump sum cash-out or consolidation will require that you know how much money you’d like to withdraw from your home’s equity.
Determine your equity position
A preliminary understanding of your equity will help you determine if refinancing is a viable solution. Nearly all mortgage solutions will only allow up to 80% loan-to-value on a refinance unless you purchase private mortgage insurance (PMI). If you step into a higher LTV, the added expense of PMI can limit the mortgage affordability.
Your equity is a combination of how much you’ve paid down your mortgage to date and the increase in property value since your purchase. Compare your approximate equity position with your goals to see if you can access enough funds within the 80% LTV, if you need to go beyond, or if waiting would be best.
Put your best financial foot forward
For those with traditional income methods, simply lowering your monthly commitments can improve your DTI, improving the lender’s view of your finances. But for those with non-traditional income, lenders often require months or years of bank statements and tax returns to determine affordability and stability.
At the earliest possibility, begin to position your personal and business accounts for a refi. That may involve showing higher personal income and claiming fewer tax deductions until the mortgage refinance is secured. Lenders like MBANC who specialize in non-QM mortgages for investors and self-employed borrowers may not require any alterations in how you report income with a deep dive into your finances in other ways.
Get your paperwork in order
Like an initial mortgage, there are several documents you’ll need to gather for your refi application. For jumbo loans and other mortgages for those with traditional income streams, two years of personal tax returns, two years of W-2’s, two months of bank statements, and proof of any additional monthly or expenses will be required. For contractors, freelancers, investors, and other non-traditional earners, you’ll need to supply two years of tax returns for your business as well, not to mention 2 years of 1099’s.
Prepare for an appraisal
For a mortgage refinance, the appraisal process is extremely important. The real estate market influences your valuation to a large degree, but so does your home’s presentation. General improvements that have minimal costs attached can make a difference. It can be small things like repairing door closures, replacing or installing additional smoke detectors and CO alarms, repairing or repainting minor damage on walls and trim, or just de-cluttering the space. The same goes for your property’s exterior and your yard.
Refinancing your mortgage can have just as much impact on your life as initially purchasing the home. Set yourself up for success by partnering with a lender who has proven results. MBANC works with luxury home buyers, non-QM mortgage applications, self-employed borrowers, investors, and others who might have difficulty getting a traditional mortgage. Find out how we can help you leverage your equity to meet your goals.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.