Conventional Refinance

Lower Interest Rate: One of the primary reasons for refinancing is to secure a lower interest rate. A lower rate can result in reduced monthly mortgage payments and significant long-term savings.

Reducing Monthly Payments: If you’re struggling with high monthly mortgage payments, a refinance can extend the loan term, which may reduce your monthly obligations, making them more manageable.

Shortening the Loan Term: Some homeowners want to pay off their mortgage faster. By refinancing to a shorter loan term, like from a 30-year to a 15-year mortgage, you can pay off your home more quickly and save on interest.

Cash-Out Refinance: A cash-out refinance allows homeowners to tap into their home’s equity and receive a lump sum of cash. This can be used for home improvements, debt consolidation, or other financial goals.

Switching from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage: If you have an ARM and are concerned about rising interest rates, you can refinance into a fixed-rate mortgage to lock in a stable interest rate.

Removing Private Mortgage Insurance (PMI): If you have built up enough equity in your home, you can refinance to get rid of PMI, which is required on many loans with less than a 20% down payment.

Consolidating Debt: Refinancing can be used to consolidate high-interest debts, like credit card debt, into a lower-interest mortgage loan. This can save money and simplify your debt management.

Improving Credit Score: If your credit score has improved since you first got your mortgage, you may be eligible for a better interest rate, which can save you money.

Change in Financial Situation: If your financial situation has improved or changed, you might be in a better position to refinance and take advantage of better terms.

Renegotiating Loan Terms: You can renegotiate various terms of your mortgage, such as the interest rate, loan term, or even the lender to better align with your current financial goals.

Credit Score: A good credit score is required to qualify for a conventional refinance. A FICO score of 620 or higher is often the minimum requirement, but a higher credit score can help you get better terms and lower interest rates.

Equity: You usually need to have a certain amount of equity in your home to qualify for a conventional refinance. 20% equity is ideal, which means your loan-to-value ratio (LTV) should be 80% or lower. If you have less equity, you might need to consider private mortgage insurance (PMI).

Debt-to-Income Ratio (DTI): Debt-to-income ratio will be calculated to ensure you can afford the new loan. The maximum allowable DTI ratio may vary among lenders, but it’s typically around 45% or lower.

Income and Employment: You need a stable source of income and employment to qualify for a conventional refinance. Pay stubs, tax returns, and other documentation will be used to verify income

Appraisal: Your home may need to be appraised to determine its current value. The appraisal helps the lender assess the loan-to-value ratio and the overall risk associated with the loan.

Property Eligibility: The property you’re refinancing must meet eligibility criteria. It should be your primary residence, a second home, or an investment property, depending on the loan program.

Documentation: You’ll need to provide various financial documents, such as tax returns, bank statements, W-2s, and more, as part of the application process.