If you own a home in the City of Chicago, you’re already familiar with the high cost of living that comes with it. Here at Neighborhood Loans, we’ve streamlined the Refinance process to help you save money and stay stress-free. Every homeowner wants the lowest interest rate, but sometimes your homebuying schedule and the market don’t line up. That’s where refinancing comes into play.

Before you jump into the refinancing process, it’s important to outline your goals. There are many different reasons to refinance a home and while a lower interest rate is one, there are other ways to take advantage of refinancing.

Common Reasons to Refinance

It’s important to recognize why you’re refinancing your home. Listed below will be some of the most
common reasons homeowners are refinancing.

Lower your Interest Rate

Lowering your interest rate is the most common reason to refinance a home. If you’re able to secure a rate that is lower than your current one, it is usually worthwhile to refinance! As you know, a lower interest rate means a lower monthly payment and paying off your home faster. It’s important to shop around and visit a few different lenders – depending on your financials, they’ll be able to offer you different rates.

Shorten your Term

If you’d like to pay off your mortgage faster, while saving money on interest, you can shorten the length of your term. For example – if you have 25 years remaining on a 30 year fixed mortgage but can now pay off your home in 10 years, refinancing will allow you to do so. The shorter your term, the faster you build equity in your home, and the quicker you own your home. If possible, you can also lower your interest rate during this process.

Switching from an Adjustable Rate Mortgage to a Fixed-Rate Mortgage

Many people get into adjustable-rate mortgages with the intention of selling the home after the fixed period ends. If rates are on the rise and you’re looking to get out of your adjustable-rate mortgage, refinancing to a fixed-rate mortgage is one of the best options! While you might not be able to secure a lower rate – you won’t have to deal with the added costs and worry of a constantly changing interest rate.

Cash-Out Refinance

If you’re interested in making additions or improvements to your home, you can use a cash-out refinance program. Using the current equity in your home to increase its overall value is a great way to invest in your future. There is an endless list of different home projects you can get completed with a cash-out refinance.

Consolidate Debt

If needed, you can use the current equity in your home to pay off other expenses. While this will be a setback and take longer to pay off your home – it could be useful if you’re in a pinch for cash.

FHA Streamline

If you are in a loan program that is backed by the Federal Housing Administration (FHA), there is a refinancing program just for you. The process is ‘streamlined’ because qualified borrowers don’t have to worry about an appraisal and don’t have to provide extensive documentation. You must be current on payments and be able to benefit from the transaction, but it is a great option for an FHA homeowner looking to do any of the above.

Once you’ve outlined your goals and decided you’re ready to refinance, it’s time to fill out an application with your lender.

To fill out an application, it’s important to have these documents and information at the ready:

  • General Info like Name / Date of Birth / etc.
  • Social Security Number
  • Income and Assets
  • Property Address and Estimated Value
  • Current Principal Balance

 

This refinance process can be completed quickly, but the application is just the first step. If you have any questions when filling out your application, reach out to your loan officer and they will help guide you through it. Once they finish reviewing your application, they’ll send it through the channels of their organization to get you approved. Now that you’re approved and have chosen a mortgage program with your lender or loan officer – they’ll start asking you to provide the required documents. It’s important to keep open lines of communication with your lender to You’ll be required to submit the following documents to verify the information that you provided on your application:

  • Signed Disclosures
  • Full Federal Tax Returns (last two years)
  • W-2s (last two years)
  • Recent pay stubs (30 days of consecutive earnings)
  • Copy of Mortgage Statement
  • Homeowners association info (if applicable)
  • Homeowners insurance info (name, agent, phone #)
  • Copy of ID/Driver License

 

Once everything has been verified by the lender, they’ll provide you with a loan estimate, set up an appraisal, and get your loan cleared-to-close. During this time, you’ll be reviewing and signing a lot of documents to prepare for closing day. Make sure you review each one thoroughly – if you find any discrepancies – have your lender resolve them. At the closing table – you’ll be signing documents that outline the responsibilities of homeownership, pledge your home as collateral for the loan, state the consequences if you fail to make payments, escrow (taxes and insurance) disclosures, and a right to cancel form. These documents all have formal names, but your loan officer will discuss them with you when the time comes. With all the documents signed, your loan will be funded in three business days. The refinance process can be quick and easy with the help of Neighborhood Loans. We know the City of Chicago like the back of our hand and can help you with any of your questions or home buying needs. Reach out to us today or fill out an application online to get started.

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