How to reduce documentation for a refinance

iStock_000013548856SmallMany home owners in Washington state are looking into refinancing with how historically low mortgage interest rates currently are. The process of a refinance is very similar to that of when you obtained a mortgage to purchase your home…there is a lot of a paperwork and documentation required for the process. However…there are options you may have available to help reduce some of the documents that are typically required.

If you are refinancing with a conventional mortgage and are getting “cash back”, in most cases, you should not have to provide bank statements as you are not having to document “funds for closing”.

If you are doing a conventional “rate-term refi” (no cash back), you may be able to increase your loan amount so that you receive some cash back at closing (lenders may allow up to $2000 back at closing without adjusting your rate lock, subject to your appraised value). For example, if you adjust your loan amount so that you receive about $500 back at closing, you may  not have to provide bank statements.

When borrowers provide bank statements to lenders, if they have large deposits that are not easily identified as their payroll, they may have to provide additional documentation to show where those funds came from. With a refi, it may be a nice option for a borrower to increase the loan amount, get a little cash back at closing and avoid providing bank statements, copies of checks that were deposited, etc.

If you have an FHA mortgage and are considering refinancing, you may be able to do an FHA streamlined refi. Some FHA streamlined refinances do not require an appraisal or income or asset documentation. FHA streamlined refinances are also available if your property has been converted to a rental and the existing mortgage is an FHA loan. FHA streamlined mortgages have a strict calculation that is used to determine what your new loan amount may be. Do not count on getting cash back at closing with an FHA streamlined refi.

If you currently have a VA mortgage, you can look at doing a VA streamlined refi (or, ready for this?…IRRRL aka interest rate reduction refi loan), which also has reduced documentation requirements. VA streamlined refi’s are similar to an FHA streamlined refi.

USDA has a fairly new pilot program for a streamline refi where debt to income ratios and appraisals may not be required. USDA mortgage loans do have income limits. With USDA’s new guidelines, a 1% reduction in interest rate is no longer required.

And let’s not forget that the HARP (Home Affordable Refi Program) is available for some conventional mortgages through the end of this year (2016). Homeowners who qualify for a HARP mortgage may not have an appraisal required.

I’m happy to help you with your refinance for your home located anywhere in Washington state, click here for a no-hassle rate quote.



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