A cash-out refinance is an excellent way for you to cash in on your home’s equity. By taking a bigger mortgage and cashing out the difference, you can get your hands on a decent amount of money. Even though the application for an Arizona mortgage refinance is almost the same as the one you did for your current mortgage, there are specific requirements that have to be met. To ensure your application is successful, here are ways to prepare for a cash-out refinance.
1. Do the Math
The first step in preparing for a cash-out refinance is determining how much you can cash out from your equity. Through this, you can conclude whether this is the best financial decision. To perform these calculations, you can either do it the old-fashioned way. Grab a calculator, a pen, and a piece of paper. Or, you can do it the modern way and use our refinance mortgage calculator Arizona. With the latter option, all you need to do is feed current home values, such as the appraised value of your home and mortgage balance. It will immediately calculate how much you can cash out. After knowing how much you can get from a cash-out refi, you can proceed with other preparation measures.
2. Make Sure You Meet the Minimum Requirements for a Cash-out Refi
Even before you apply for an Arizona mortgage refinance, you must determine the minimum requirements and whether you qualify. Some of the necessary requirements include;
• Perform a credit check. All mortgage lenders will have a minimum credit score. Check your current score. If it’s high, you will be assured of qualifying and getting a reasonable interest rate.
• The second requirement is a debt-to-income ratio of less than 50%. You need to figure out how much of your income goes to paying off debts. Also, the lower the DTI ratio, the better.
• The final requirement is to calculate your home equity. Our refinance mortgage calculator can help you identify your current home equity. Please note that you may only borrow 80% of your home value. This needs to be calculated as well so that you can get an accurate figure.
3. Gather All Relevant Documents
Another crucial preparation step is gathering relevant data. During the application of a cash-out refi, lenders will ask for the following documents. You should prepare these documents in advance;
• Proof of income. This can include pay stubs, tax forms, and tax returns
• Homeowners and title insurance
• A recent credit report
• Your monthly debt load. This will be used to calculate the DTI ratio
• A current appraisal of the property
Ensure these documents are readily available because the lender can ask for them at any time. Because lenders have varying requirements, some may need more financial information.
4. Shop and Compare Rates
The only way you can be guaranteed of getting a good deal is by shopping around for mortgage lenders and comparing rates and terms. Through comparison, you can save a lot of money, enjoy lower rates and minimal closing costs. It may take time, but it will be worth the wait.
Knowing how to prepare for a cash-out refinance can make the entire process quicker and less frustrating. Once you have all the above in check, you can start the application process.