Types of Home Refinance Loans

What Is A Refinance Loan?

A refinance loan is the replacement of your existing mortgage with a new loan that may have different or more favorable terms, such as a shorter repayment term, lower monthly payments, or a lower interest rate. Mortgage refinancing is a term that intimidates some homeowners, but don’t worry — the CrossCountry Mortgage team is here to educate you and provide the necessary support so you can meet your financial goals. Refinancing often results in a more favorable financial situation.

What Are The Benefits Of Refinancing?

You can refinance your home for a number of reasons, most of which typically result in a more favorable financial situation. Some of these include:

  • Obtaining a lower interest rate to reduce monthly payments and save money.
  • Changing the term on a mortgage (for example, from 30 years to 15 years). Shortening your term may help you avoid penalty clauses if you plan to pay off your loan early.
  • Consolidating multiple debts into one easy-to-manage loan.
  • Converting your existing mortgage from an adjustable rate mortgage into a fixed rate mortgage with fixed monthly payments.
  • Converting multiple mortgages into one mortgage.
  • Freeing up cash that you can use to pay off debt and make special purchases. This is called a cash-out refinance. The purpose of this type of loan is to extract equity from your home.

How Do I Refinance My Mortgage?

The process for refinancing your mortgage will likely be similar to the steps you went through to acquire your current loan. CrossCountry Mortgage will look at your income, credit score and the value of your property. If refinancing your home sounds like something that fits with your homeownership goals, then finding the right type of loan is the next step.

What Are My Refinance Loan Program Options? 

If refinancing your home mortgage sounds like something that fits with your homeownership goals, then finding the right type of loan is the next step.

Types of refinance loan programs

1. FHA refinance loans

An FHA home loan is a government-backed mortgage program offered by a participating lender like CrossCountry Mortgage that gives you financial flexibility when buying a home, such as a low down payment and other benefits. FHA home loans are insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD).

Some benefits of FHA refinance loans include:

  • A low down payment requirement
  • Seller can contribute up to 6% of closing costs
  • Up to 96.5% financing*
  • A parent or relative can co-sign your loan as a non-occupant

2. FHA streamline refinance program

An FHA streamline refinance loan is a loan product that is available for homeowners who have an existing FHA home loan. FHA streamline refinances are the fastest and most simple way for a homeowner with an FHA-insured home loan to refinance their existing mortgage because the FHA allows the home’s original purchase price to be used as the current value of the home rather than requiring an appraisal. This loan may be a good option for homeowners who are underwater on their mortgages because the loan will be based on the original purchase price regardless of what the home is worth when the homeowner refinances.

3. VA IRRRL (VA streamline refinance)

A VA interest rate reduction refinance loan (IRRRL) — also known as a VA streamline refinance — is a veteran mortgage refinance program that can help veterans who already have a VA home loan benefit from a lower interest rate and lower monthly payments by refinancing their mortgage.

Some benefits of VA IRRRL include:

  • No appraisal or credit underwriting package is required.
  • You can include the costs of getting an IRRRL in the new loan.
  • You can refinance an existing VA ARM into a fixed-rate VA home loan.
  • You can reduce a 30-year mortgage into a 15-year mortgage to pay it off sooner.

4. USDA rural streamline refinance

The USDA streamline refinance loan is an option for people who already have a USDA home loan for the purpose of lowering their interest rate. It was designed to emulate the successful VA interest rate reduction refinance loan (VA IRRRL) and other popular streamline refinance loans. The benefit is a streamlined process that makes getting your refinance easier. Since you already have a USDA home loan, you have already qualified, so it’s unnecessary to require redundant documentation. Hence, the loan is faster and requires less paperwork. Additionally, a property inspection is not required and closing costs can be absorbed into the financing, requiring less money upfront.

5. Cash-out refinance

Cash-out refinance is mortgage refinancing using your home equity built over time to borrow more money than you owe on your loan and cashing out the difference, either for home renovations or other expenses, like student loan payoff, medical bills and more. With a cash-out refinance, a loan is taken out on the property you already own, with a loan amount that is larger than the current loan payoff (plus the costs of the transaction). You are able to do this transaction by liquidating the equity you have in your home.

6. FHA 203(k) refinance loan

An FHA 203(k) loan is a rehabilitation loan that can help you buy or refinance a home that’s in need of repair or modernization. In addition to the cost of the home, the loan also covers the cost of qualified repairs. FHA 203(k) home loans are offered by Federal Housing Administration (FHA)-approved lenders like CrossCountry Mortgage. Loans are insured by the U.S. Department of Housing and Urban Development (HUD).

7. Jumbo loans

Jumbo loans provide financing up to $5 million for the purchase of luxury and high-cost homes. With a jumbo loan, you can achieve the kind of lifestyle you want to live — whether you’re upgrading or purchasing an investment property. The loan is called a jumbo loan because the amount is higher than conventional lending limits, which is the maximum amount that Fannie Mae and Freddie Mac will purchase in the secondary market.* Like conventional mortgages, jumbo loans can either be fixed-rate mortgages or adjustable-rate mortgages (ARMs).

Requirements to refinance a home:

  • Proof of income
    Find and make copies of your pay stubs for the past few months. If you’re self-employed, profit and loss statements may be required.
  • Tax information
    Gather your W-2s, 1099s, and tax returns for the past two years. If you’re self-employed or an independent contractor, you’ll be required to provide your 1099-MISC information.
  • Credit details
    We’ll perform a credit check when you apply.
  • Debt documentation
    You’ll be required to provide documentation on your outstanding financial commitments. Gather materials on your current mortgage, car loans, student loans, and any other debts.

The process for refinancing your mortgage will likely be similar to the steps you went through to acquire your current loan. CrossCountry Mortgage will look at your income, credit score, and the value of your property. Ready to take the next step? Contact the CrossCountry Mortgage team today!

*Generally set at $548,250, though this figure may be higher depending on your state and county. Call for details.

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