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When you refinance, you replace your current home loan with a new one. Mortgage refinancing requires you to qualify for the loan, just as you had to meet the lender’s requirements for the original mortgage. You file an application, go through the underwriting process and go to closing, as you did when you initially purchased the home.
The Mortgage Refinancing Process
First, take care of any issues with your credit so that your credit score is as high as possible and you qualify for the lowest interest rates. Have a rough idea of the rates and other terms you desire in your new loan. Remember: These terms should represent an improvement on the terms of your existing loan.
Next, shop around to find a qualified Kansas City lender with the best terms. Don’t just choose your current lender; get at least three or four quotes from competitors before inquiring with your current lender about what it is willing to offer.
Don’t open any new credit during the refinancing process; it could hinder the deal. Before signing the deal, carefully review the new loan terms and all associated fees so that you know what to expect financially when it’s time to make payments.
As you go through this process, keep an eye on the closing costs. Also, watch out for things like prepayment penalties, which can cause problems down the road if you pay off the mortgage early or refinance again.
Kansas City mortgage refinance
Reasons to Refinance a Mortgage
Lowering your monthly payment
When your goal is to pay less every month, you can either refinance into a loan with a lower interest rate or a longer loan term. However, extending the term means that you pay more interest in the long run.
Paying off the loan faster
You can switch to a mortgage with a shorter term and, as a result, pay less interest over the life of the loan. One downside to this is that your monthly payments will probably go up.
Cashing out
If you have significant equity in your Kansas City home, you may be able to cash out a portion of it with a refinance to pay bills, finance a large purchase, or buy out an ex-spouse in a divorce.
Getting rid of FHA mortgage insurance
Whereas private mortgage insurance (PMI) on conventional home loans can be canceled, you can only get rid of FHA mortgage insurance premiums by selling your Kansas City home or refinancing when you have accumulated enough equity (equity can be calculated by estimating the value of your home, then subtracting your mortgage balance from that number).
Switching from an adjustable rate to a fixed rate loan
Interest rates on adjustable rate mortgages (ARMs) can increase over time, while the ones on fixed rate loans stay the same. If you’re looking for more of a sense of financial stability and would prefer making steady payments on your loan, then you might want to consider refinancing.
Consolidating debts
If you have multiple loans, it might make sense to consolidate them into a single loan; it’s easier to keep track of payments that way.
Different Types of Mortgage Refinancing
Rate-and-Term
With this type of loan, the goal is to change the interest rate, loan term or both without making any changes to the amount of the loan. This option is best if you’re trying to save money on your monthly payment or switch your loan from an adjustable rate to a fixed rate.
Cash-Out
As the name suggests, a cash-out refinance involves cashing out a portion of the home’s equity. Doing so results in a higher loan amount, with the difference typically equal to the amount cashed out. While a cash-out refinance can help Kansas City homeowners get the cash they need for certain activities, it typically results in a higher monthly payment and interest rate than a rate-and-term refinance loan.
Cash-In
Much less common than a cash-out refinance is a cash-in refinance. This happens when the homeowner refinances their mortgage loan and brings money to the table to reduce their new mortgage balance. A cash-in refinance may be worth considering if you’re underwater on your mortgage or want to get rid of private mortgage insurance, qualify for a lower interest rate, or keep your mortgage amount below certain limits.
Mortgage Refinancing FAQ’s
What’s the difference between pre-qualified and pre-approved?
Pre-qualification is a determination of the loan amount you’re likely to receive. To obtain pre-qualification, you usually are interviewed by a licensed Kansas City loan officer who determines the pre-qualification amount. On the other hand, to be pre-approved, you must submit an application and verify your credit and financial history. After you receive your pre-approval certificate, you’re in a stronger position to close earlier and negotiate a better price.
What are points?
Points are prepaid interest that you can pay up front. You can pay points to get a lower rate on both fixed rate and adjustable rate mortgages, but the points charged to reduce the rate may vary depending on the type of loan. One point is equal to 1% of the mortgage amount.
If my credit score is low, how can I raise it?
Paying your bills on time, reducing your credit balances, and trying to not apply for credit too often are all ways that you can raise your FICO score.
What’s a rate lock?
A mortgage rate lock is a promise to you from the lender to hold a specific combination of an interest rate and points for an agreed upon time (typically 10, 15, 30, 45 or 60 days) until you can close on your home. Locking in a rate protects you from unforeseen interest rate increases that can occur in the days or weeks leading up to closing, but conversely, if the rates fall, you may not be able to take advantage of the lower rates.
If your credit score is in good shape and you find a qualified Kansas City lender with good terms, refinancing might be a good choice for you. However, depending on your goals and financial situation, it may not always be your best option. It’s important to weigh the benefits of refinancing your Kansas City home against the risks and, at the end of the day, do what will make the most financial sense for you.
Your Kansas City Mortgage Refinancing
Expert: McGowan Mortgages
Contact McGowan Mortgages today at (816) 631-9687.
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Janet McGowan
22:20 02 Jun 23
Great team to work with!
Emily Fox
13:24 28 May 23
Derek and his team were tremendously helpful in buying our first home. They were prompt at answering questions and explained the house-buying processes in a way that made sense, and even cleared up confusion that other people involved told us about how buying a house works. They walked with us step by step through the process and did everything they could to help us along the way. If we buy in the future, we'd gladly work with McGowan Mortgages again!
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It was an up and down journey to purchase my first home but through their knowledge and hard work they made it happen and I couldn't be happier, thanks gents
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Working with McGowan and his team was the best decision we made to start our home buying process, they did a fantastic job getting us in a our new home on time and on budget, the entire process was stress free, we were kept informed throughout the entire process, I would definitely recommend them to anyone trying to buy a house.
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17:04 23 Jan 23
Hello, trust and believe the McGowen Team is the BEST ever. I am ony second home purchase, and couldn't have done it without these truly professionals who work to make your dream of home ownership come true.
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22:34 18 Jan 23
A fantastic, brilliant team! McGowan mortgages works for you and goes above and beyond to fulfill all your mortgage needs. Prompt return on calls and questions. Absolutely grateful for all their hard work to help our family relocate.
Lorenzo Allen (Rentzy TV)
21:21 16 Jan 23
Derek and his team will go to war for you! They really care about their clients and consistently prove through communication and their actions, that they always have their clients best interests. If you want excellence in customer service, A1 communication, and a stress free environment for you mortgage lending needs, McGowan mortgages is the way to go!
Dylan & Amanda Wagoner
00:28 16 Dec 22
We loved working with McGowan Mortgages!!They really made things smooth for us and we love our new home!
Joshua Reeves
00:04 26 Nov 22
One of the best! Stand up 5 Star guy outside of the mortgage world too!
Mike O'Brien
00:02 19 Nov 22
Great service. Great to work with
Megan Thompson
23:27 02 Oct 22
Derek and the entire McGowan Mortgages Team are amazing! This Team is filled with extremely friendly and very knowledgeable people who are there for you every step of the way! Derek has incredible videos for each milestone and every potential question you can think of for anyone looking for a mortgage. These amazing resources combined with his drive to help every client are just a few assets that make McGowan Mortgages one of a kind! I am honored to be able to work them and am continually inspired by this Team who makes you feel like family. Working with McGowan Mortgages has been a dream and I encourage everyone to reach out to them if you are in the market for a mortgage =)
Ryan Finney
01:24 01 Oct 22
Super easy! Whenever I had question, they had answers!! Which was a lot! Great team!
Kristi B
01:23 01 Oct 22
Excellent service! My favorite thing about McGowan Mortgage is they will call the sellers agent to let them know about the pre-approval to help you win the bid on the house. They go above and beyond to get you into your new home AND they keep in touch with your realtor. Excellent communication and they truly do work for you. You can't go wrong with McGowan!
Trena
18:09 31 Aug 22
Derek is amazing! I've worked with him on a refinance at his previous company, I recommended him to multiple friends who also chose to work with him, and then I reached out to him again for my recent home purchase with his new company. He and his team did an outstanding job dealing with my unique situation, found a way to make it work, and then kept in constant contact with the agents (both buyer's and seller's) to ensure that things stayed on schedule and moved smoothly. They're awesome, and I highly recommend them to anybody in the market for a purchase or refinance!
Kimaada Ellison
18:35 22 Aug 22
As a first time home buyer with very limited knowledge about this entire process, this company and all of its staff have really made me feel comfortable about asking questions and learning about how everything works. Elijah has fielded many questions from me and each time was able to rationally explain everything to me in layman's terms that helped me understand. I am so pleased to have come across this organization and would recommend them to any potential home buyer without hesitation. Keep up the great work guys.- KE
Sam Kolthay
16:48 15 Aug 22
This is the second time I've worked with Derek on buying a house, and I know I'd use him for a third!Derek and his team work tirelessly to get the loan across the line as quickly as possible and at the best rate.I highly recommend trusting Derek with your loan needs!
nathan denham
20:17 07 Aug 22
Being involved with Real Estate for many years my clients have used many different lenders. There have been good ones and bad ones but McGowan Mortgage is different than the rest and always delivers. I highly recommend you use McGowan Mortgage for your financial lending needs.
Rachel Diebold
00:18 29 Jul 22
Tarek Jebali
02:08 22 Jul 22
Derek is a true professional; knowledgeable, hard worker and he is here when you need him.Thank you again for everything and for hanging in there with me. I highly recommend him for your mortgage needs
Steve Lopez
02:06 13 Jul 22
First time buying a home couldn’t have choose anyone better. Super helpful and have a wonderful team that will make sure all your questions get answers. Definitely recommend
Jared Pfeiffer
13:39 18 May 22
I have worked with Derek and his team on multiple purchases. His attention to detail, the speed in which he works and his collaboration makes him at the top of his industry in my opinion.Looking forward to continuing to work with him in the future.
Annie
00:44 02 May 22
artbycins
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Eric L
14:41 29 Apr 22
Derek is awesome!! His knowledge of the mortgage industry is incredible. Every question I’ve had for him he gives me an easy-to-understand yet in-depth answer. We’re working on a refi for our current home and I’ll definitely reach back out once we’re ready to purchase our next home! Thanks Derek!!
Steve Zebley
13:56 29 Apr 22
Derek McGowan is the best!
Elijah Dixon
00:10 29 Apr 22
Derek and his team are extremely knowledgeable. The level of communication and use of technology is second to none ....
Sam Tracy
20:02 28 Apr 22
Derek helped my wife and I buy our first house and was so great at walking us through the entire process, making sure we understood everything. He was always available to answer all of our questions and was impressively quick on getting paperwork signed and submitted. Put simply, he made everything easy. So glad we worked with Derek and he will be our first call when we look at moving again!
Collin Joiner
18:23 28 Apr 22
Derek is absolutely fantastic! Not only did he make financing my new home completely seemless, but he made himself available practically 24/7. Not like your usual broker that claims they can always be reached and has your best interest at heart, but he is genuine, up front, and when you pick up the phone to call or text him... he actually answers or gets right back with you! I did my initial loan with him, when rates dropped I did my refi with him, I also got my ex to finance through him for her first home. And through each interaction he stayed consistent in his approach and true to the values he promises. If it's Derek or associated with Derek, I promise you can't beat it!! He's the best!
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McGowan Mortgages is an Equal Housing Lender. As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, marital status, age, because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. Disclaimer: Programs subject to change without notice. All borrowers must qualify per program guidelines.