Is your mortgage loan no longer working with your financial situation? You have options! Our guide to refinancing in Washington will help make the process a little easier.
Best Refinance Lenders in Washington
When you refinance your mortgage loan, you don’t need to work with the same lender that gave you your original loan. If you aren’t satisfied with your current lender, explore a few of our favorites below.
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Refinance Rates in Washington
Refinancing a mortgage loan is usually a much quicker and more streamlined process compared to getting your mortgage loan. Though the specific process you’ll go through when you refinance may vary depending on your lender, you can usually expect the following general steps:
- Determine the goals of your refinance. The first thing you’ll need to do before you refinance is to define your goals. The reason why you’re refinancing will determine which lenders can assist you and which loans you qualify for.
- Find a lender. Once you’ve decided what you’d like to get out of a refinance, you’ll need to choose which lender you want to work with. The best place to refinance a mortgage loan will vary depending on your needs and what you’re looking for in a lender.
- Apply for a refinance. After choosing your lender, apply for a refinance using your lender’s individual process. The specific steps you’ll need to take to apply and the documentation you’ll need may vary depending on the lender you pick. For example, if you choose Rocket Mortgage to service your refinance, you’ll apply entirely online and you’ll receive a decision instantly in most cases. On the other hand, if you refinance through a local bank, you might need to wait to hear back after your lender has a chance to review your paperwork.
- Get an appraisal. Like when you apply for your original mortgage loan, refinancing a mortgage often comes with a new appraisal. Though not every refinance requires an appraisal, you’ll always need to get another appraisal when you work with a new lender or take cash out of your property.
- Go through underwriting. Exactly like when you get your home loan, underwriting is the time when your lender goes through your loan with a fine-toothed comb and ensures that you qualify for the loan you want. Though most of this process takes place behind the scenes, responding to your lender’s inquiries quickly can make this process go more smoothly.
- Attend a closing meeting. After the abbreviated closing process concludes, you’ll attend a closing meeting. At closing, you’ll sign on your new loan and pay your closing costs.
After the closing meeting concludes, you’ll manage your new mortgage loan just like you managed your previous mortgage.
When Should You Refinance in Washington?
There are many reasons why you might want to refinance your loan. Some situations where a refinance can be beneficial include the following:
- You need a lower monthly payment. If you’re having trouble affording your monthly payment, you might want to refinance to a longer term. When you take on a longer term, you give yourself more months to finish paying off your loan. This means that you’ll pay less each month.
- You want to pay off your loan faster. On the opposite end of the spectrum, you might want to refinance to a shorter term if you now have significantly more income than you did when you applied for your loan. Refinancing to a shorter term allows you to pay less in interest over time, which can save you thousands of dollars over time.
- You want to take cash out of your home. A cash-out refinance is a special type of refinance that allows you to take out a certain percentage of built equity in your home in exchange for a higher principal balance. For example, if you have a loan with a principal balance of $100,000 and you take $20,000 out of your home equity in a cash-out refinance, your lender would give you $20,000 in cash after closing and your new loan balance would be $120,000.
A cash-out refinance can help you pay off medical or credit card debt, student loans or you can use them to finance a repair or renovation project. Unlike other types of loans, there are no limitations on how you can use the money you take from a cash-out refinance. Many homeowners refinance a mortgage to take cash out because they have debt with a higher APR than their home loan.
- You want to get rid of FHA insurance. Unlike private mortgage insurance (PMI) you must pay FHA insurance for as long as you have an FHA loan. One easy way to get rid of your FHA insurance is to refinance to a conventional mortgage loan once you hit 20% equity in your property. Refinancing from an FHA loan to a conventional loan with at least 20% equity allows you to avoid the PMI requirement while also getting rid of your FHA insurance.
When Should You Not Refinance?
Even if you’re working with the best mortgage company in the world, refinancing isn’t appropriate for everyone. Let’s take a look at a few situations where you might not want to refinance in Washington.
- You can’t afford closing costs. Many homeowners are surprised to learn that refinancing comes with closing costs. Though closing costs on refinances are usually much more affordable than closing costs on initial mortgage loans (expect to pay around 1% of your loan balance) you’ll still need cash upfront during closing. If you aren’t sure whether you can afford your closing costs, contact your lender to learn more about the specific expenses you’ll be responsible for covering.
- You don’t plan to live in your home for much longer. It’s possible to save money on your refinance if you refinance to a lower interest rate than your current loan. However, you’ll need to account for closing costs when you calculate how much money you’re saving. If you plan to move out of your home in the next few years, you might end up paying more in closing costs on your refinance than you’ll save with your new interest rate.
Bad Credit Refinance
Your credit score plays a major role in your ability to refinance your mortgage loan. If your credit is lacking, you might be limited in the number of lenders you can work with and the type of loans you qualify for. However, there are a few ways you can refinance with less-than-perfect credit.
- Streamline refinance: If you have a VA loan or an FHA loan, you might be able to refinance your rate or term with a streamline refinance. Streamline refinances are expedited refinances that don’t require income verification or credit checks. In many cases, you can also get a streamline refinance without a new appraisal.
Not everyone will qualify for a streamline refinance. You must already have an FHA or VA loan to qualify. If you want to refinance from a conventional loan to an FHA loan, for example, you’ll need to meet credit requirements. You must also be refinancing your rate or term only (no cash-out refinances) and you must have a consistent history of timely mortgage payments. Talk to your lender or research online mortgage lenders offering streamline refinances to learn more about whether you qualify.
- Apply with a non-occupying loan co-client. A non-occupying co-client is someone who doesn’t live in your home but who agrees to take on financial responsibility for your loan if you default. If you know someone with great credit, you can take advantage of that person’s score by adding him or her to your loan when you refinance.
Of course, your co-client must agree to the terms of the refinance and must accept responsibility for your loan payments if you can’t make them. Be 100% sure that you can keep up with your new mortgage payments after you refinance with a co-client to avoid getting your family member or friend into trouble with your lender.
Refinance the Right Way
There are plenty of reasons why you might want to refinance your mortgage loan. Though the process may seem complicated, the truth is that refinancing is much simpler than getting a first mortgage loan. The key to a smooth refinancing process is doing your research and knowing all of your options — especially when it comes to lenders and loan types.
As a homeowner in Washington, you have your choice when it comes to lenders. If you aren’t sure which lender you want to work with, we recommend starting your search with Figure. Figure prides itself on providing a fast and easy refinance process with a 100% online application powered by blockchain technology. Figure is an especially great choice for anyone who wants to close on a refinance as soon as possible. Figure’s clients close in days instead of waiting months on end for all closing steps to conclude.
No matter which lender you choose, it’s important that you know how to manage your new mortgage loan after you close. Though there is no legal limit on the number of times you can refinance, you may end up negating your savings through closing costs if you must refinance again in the future. Use our mortgage calculator to understand your payment before you apply for a new loan.
Get Ready for Take Off
Rocket Mortgage® is an online mortgage experience developed by the firm formerly known as Quicken Loans®, America’s largest mortgage lender. Rocket Mortgage® makes it easy to get a mortgage — you just tell the company about yourself, your home, your finances and Rocket Mortgage® gives you real interest rates and numbers. You can use Rocket Mortgage® to get approved, ask questions about your mortgage, manage your payments and more.
You can work at your own pace and someone is always there to answer your questions — 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Give Rocket Mortgage® a try.