If you’ve had difficulty making your mortgage payments or are looking to take advantage of rate changes since first receiving a loan from a mortgage broken in Atlanta, now may be the time to consider a rate and term refinance from your Atlanta mortgage company.
A rate and term refinance allows you to pay less in interest or reduce your overall monthly payment. Here we take a look at the rate and term refinance and its requirements and whether or not this form of refinancing can work for you.
What is a Rate and Term Refinance?
A rate and term refinance lets you change the terms of your current loan and replace them with terms that work for you. A rate and term refinance gives you more or less time to pay off your loan, or a lower interest rate and a different monthly payment to better fit your financial situation and lifestyle.
Rate and Term Refinance Requirements
Like most loans, you need to meet your lender’s standards before you qualify for a rate and term refinance. These requirements include:
A Decent Credit Score
You always want to inquire with a reliable mortgage broker in Atlanta when it comes to credit scores for refinancing. Credit requirements vary by loan. Most loans require a credit score of at least 620, while some loans, like the FHA Streamline refinance, have even lower credit score requirements. When choosing to refinance, it’s important to talk to an Atlanta mortgage company to find the best loan to fit your credit score.
At Least 20% Equity in Your Home
Your home equity equals the percentage of the loan that you’ve already paid off. For most loans, it’s a good idea to refinance when you have at least 20% equity in your home. You can refinance with a lower equity percentage, but you want to talk to a mortgage company to ensure you’re getting the best interest rates.
Account for Closing Costs
Closing costs should always be taken into consideration when you’re refinancing. Closing costs for refinancing usually equal between 2% and 3% of the entire cost of your loan. If you can’t cover the closing costs upfront, you may be able to roll them into your new loan depending on how much equity you have.
You want to take a good look at your debt-to-income (DTI) ratio before you refinance. A good rule to go by is aiming for a DTI of 50% or lower.
Applying for a Rate and Term Refinance with your Mortgage Broker in Atlanta
Since you’ve already applied for a loan before with a mortgage broken in Atlanta, applying for a rate and term refinance will be very similar. In most cases, you’ll submit an application along with your required financial documentation. From there, your lender will schedule an underwriting, appraisal, and a closing meeting.
Before you attend your closing, you’ll receive a Closing Disclosure which contains details about your loan such as the principal balance, interest rate and monthly payment. Here you want to read through the information and make sure the terms add up to what you want in your rate and term refinance.
Contact an Atlanta Mortgage Specialist
If the above requirements align with your financial situation, now might be the time to consider a rate and term refinance to take advantage of better interest rates and overall monthly payments.
Contact BrightPath, a mortgage broker in Atlanta, today to discuss your refinancing options and we’ll help you find the best refinancing solution to fit your needs!