Applying for refinancing is in most ways similar to the mortgage application process-basically, you're applying for a new mortgage. But since you're already in your home, the Massachusetts refinancing process generally moves fairly rapidly.
Massachusetts refinancing rates and terms are based in large part on "loan to value" (LTV). LTV is simply the ratio of unpaid mortgage principal to home value. (For example, if you owe $150,000 in principal on a home valued at $250,000, then your LTV is 60%). The higher your LTV, the greater a risk you are to lenders.
Usually your lender will arrange the appraisal. There are typically two types of home appraisals:
As a rule, Massachusetts refinancing lenders require you to have paid down at least 20% of the appraised value of your home.
As with your current mortgage, you'll need to supply in-depth documentation of your current financial situation. This documentation typically includes, but isn't limited to:
With this information, your lender can get a good idea of how much mortgage debt you can reasonably take on.
Shortly after you apply, your lender will provide you with a good faith estimate that lists the costs you can expect to pay in order to close on your refinanced mortgage. On average, totaling between 2% and 3% of your loan amount, they typically include:
Before your closing, you'll receive a preliminary HUD-1 Settlement Statement that should accurately list your final closing costs. Some categories of closing costs may change from the estimates that were provided on the GFE. Ask your lender to explain these differences. If these new costs put too much strain on your budget, ask about your options.
NEXT: The Closing