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| GENERAL QUESTIONS |
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Refinancing |
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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 Shearson Mortgage? |
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Can I finance an investment property with funding from Shearson 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 Shearson 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 Shearson 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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