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What are the reasons for refinancing? |
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How do I apply for a refinance loan? |
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What are the costs involved in refinancing? |
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What criteria do lenders use when approving a loan? |
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How much documentation will I need to supply to verify the information I provided on my application? |
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What if I can't supply the standard documentation necessary to get a loan? |
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What is Private Mortgage Insurance (PMI) and why would I need it? |
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Do I need to get an appraisal when I refinance? |
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What is an impound/escrow account? |
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What is homeowner's insurance? |
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How does a refinance closing work? |
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Can I get a loan if I'm not a U.S. citizen or if I live outside the country? |
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Can I finance a vacation home with a loan from Shearsons Mortgage? |
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Can I finance an investment property with funding from Shearsons Mortgage? |
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Effect of Refinancing on Your Personal Taxes |
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Considerations Before Refinancing Your Existing Mortgage |
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Deciding When It Makes Sense to Refinance |
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What are the reasons for refinancing? |
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There are many benefits to refinancing; it just depends on
what your objectives are. Some of the most popular reasons
are:
- To lower your monthly payments by refinancing at a
lower interest rate.
- To convert a portion of your equity into cash by
obtaining a new loan for a larger balance than your
current loan.
To switch from an adjustable rate to the stability of a
fixed rate.
- To consolidate debt by refinancing a higher loan balance
and using the cash difference to pay off credit cards, auto
loans or other debts.
- To pay off the mortgage sooner by switching to a
shorter term.
Call us toll-free and speak to a personal loan consultant
to find out if refinancing is right for you.
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How do I apply for a refinance loan? |
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Either fill out the application online or call us directly and you may be
approved in minutes.
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What are the costs involved in refinancing? |
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The closing costs, including lender fees, are typically 1%
to 2% of the loan amount. In addition, you may choose to pay
points in order to get a lower rate, or accept a higher rate
in exchange for having the lender pay some or all of your
closing costs.
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What criteria do lenders use when approving a loan? |
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Lenders look at three criteria: Capacity, Credit and Collateral.
CAPACITY
The lender will weigh your housing expenses and total debt against your
monthly income to determine your ability to repay a loan. They'll also
need proof that you have the cash available for down payment and closing
costs by verifying funds from sources such as bank accounts, stocks,
bonds, mutual funds, sale of an existing home, or gifts from family
members.
CREDIT
To determine your credit risk, the lender will look at previous mortgage
payment history, rent payment history, credit card use and installment
debt payment history. If you pay your bills regularly and on time,
you're demonstrating the integrity that lenders are looking for in
a borrower.
COLLATERAL
When you ask for a home loan, you're putting the home itself up for
collateral, so the lender will want to know what the home is worth.
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How much documentation will I need to supply to verify the information I provided on my application? |
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Every situation is different. Once you submit your loan application
online you'll automatically receive a customized list of the
documents you'll need to provide. If you apply over the phone,
you'll receive this list within three business days.
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What if I can't supply the standard documentation necessary to get a loan? |
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We offer special loan programs that include low documentation
or even no documentation. You can indicate how much documentation
you'll be able to provide in your online application, or you can
call your personal loan consultant for more details.
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What is Private Mortgage Insurance (PMI) and why would I need it? |
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In most cases, if your first mortgage amount is greater
than 80% of the property's value, the lender may obtain
Private Mortgage Insurance (PMI) to safeguard its investment
against the possibility of default. PMI is collected monthly
along with the mortgage. Within three days after your loan
application is submitted you'll be sent an estimate projecting
the amount of the monthly PMI payment. As your equity increases,
you may qualify to have PMI removed. There may be ways to finance
your home so that PMI is not required. Your loan consultant can
provide you with more information.
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Do I need to get an appraisal when I refinance? |
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Yes.
If the house was appraised within last 3 months, we maybe
able to use the existing one. Talk to your loan advisor
for details.
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What is an impound/escrow account? |
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Instead of paying large, lump sums to cover the costs of
homeowner's insurance and property taxes, these payments
are divided into installments which are paid to the lender
monthly along with your loan principal and interest. The
lender will hold the money in an impound/escrow account
and make the payments from the account when they are due.
Impound/escrow accounts may be optional, or they may be
required by the lender, depending on the location of the
property, the size of the loan in relation to the value
of the property, and the loan type.
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What is homeowner's insurance? |
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Homeowner's insurance is designed to protect your home.
It is also known as hazard insurance, or fire insurance.
While the lender requires this coverage, you determine
which insurance company will carry the policy. Homeowner's
insurance premiums are either paid directly to the insurance
agency or by your lender through an impound/escrow account.
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How does a refinance closing work? |
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The refinance closing will be conducted the same way that
your loan was closed when you first purchased the property.
Soon after your loan is approved your loan consultant will
send a list of documents you'll need to bring to the
closing. You'll also be sent an Estimated Settlement
Statement that tells you the amount, if any, you'll need to
bring to closing in the form of a cashier's check, as well
as an outline of how the funds from your new loan will be
disbursed. If this is a refinance of a primary residence,
the loan won't actually fund until three business days after
signing the loan documents, due to the borrower's right of
rescission.
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Can I get a loan if I'm not a U.S. citizen or if I live outside the country? |
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Yes.
As long as the property you are buying or refinancing is in
the United States, you can apply right here online. We offer
special programs for foreign nationals and resident aliens.
Talk to a loan advisor for details.
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Can I finance a vacation home with a loan from Shearsons Mortgage? |
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Yes.
We have aggressive programs to help borrowers purchase or
refinance a second home. To get started, you can apply online
or call us toll-free.
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Can I finance an investment property with funding from Shearsons Mortgage? |
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Yes.
Just apply online or call us toll-free and find out all the ways
we help you secure purchase and refinance loans on investment
properties.
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Effect of Refinancing on Your Personal Taxes |
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With a lower interest rate on your home loan, you will have less
interest to deduct on your income tax return. That, of course,
may increase your tax payments and decrease the total savings
you might obtain from a new, lower-interest mortgage.
You should be aware of an Internal Revenue Service (IRS) ruling
with respect to points paid solely for refinancing your home
mortgage. IRS regulations require that interest (points) paid
up front for refinancing must be deducted over the life of
the loan, not in the year you refinance, unless the loan is
for home improvements. This means that if you paid a certain
number of points, you would have to spread the tax deduction
for those points over the life of the loan. If, however, the
loan or a portion of the loan is for home improvements, you
may be able to deduct the points or a portion of the points.
Check with the IRS regarding the current rulings on refinancing,
particularly if you are using the new loan to make home
improvements.
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Considerations Before Refinancing Your Existing Mortgage |
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When you're making your decision, there are several things in mind.
First, even a small rate cut can pay off quickly. That's because you
can easily find mortgage companies willing to waive routine refinancing
charges such as application, appraisal and legal fees (which can add
up to $1,500 to $3,000). Of course, in exchange for low or no up-front
costs, you'll have to be willing to accept a rate that's somewhat
higher than the prevailing rock bottom.
Second, if you are planning to stay in your home for at least
three to five years, it may make sense to pay "points" (a point
equals 1% of the loan amount) and closing costs to get the lowest
available rate.
And third, you can avoid laying out cash and still get a low rate
by adding the points and closing costs to your new mortgage. Does
that mean shouldering a lot of extra debt? Not necessarily. If
you've had your current mortgage for at least three years, you've
probably reduced your balance by several thousand dollars. So you
may be able to tack your closing costs onto your new loan and still
end up with a mortgage that's smaller than your original one -- plus,
of course, a lower rate and lower monthly payment.
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Deciding When It Makes Sense to Refinance |
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Traditionally, the decision on whether or not to refinance
has meant balancing the savings of a lower monthly payment
against the costs of refinancing. But in recent years, companies
have introduced "no cost" and low-cost refinancing packages that
minimize or completely eliminate the out-of-pocket expenses of
refinancing. (These refinancing packages compensate with a higher
interest rate, or by including some of the costs in the amount
that is financed.)
With traditional refinancing, the most often cited rule-of-thumb
is that the interest rate for your new mortgage must be about
2 percentage points below the rate of your current mortgage for
refinancing to make sense. However, with the newer low- and
no-cost refinancing programs, it can be worth your while to
refinance to obtain a smaller reduction in interest rates.
How long you expect to stay in your home is also a factor to
consider. If you'll be moving in a few years, the month-to-month
savings may never add up to the costs that are involved in a
refinancing.
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