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Mortgage Refinance During COVID In Texas

December 15, 2020 | By Reef Merhi

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You’re thinking about refinancing your mortgage. You may be wondering how to go about a mortgage refinance during COVID-19.

Refinancing can lower your mortgage interest rate, give you access to funds for remodeling, or consolidate debt. It’s important to know how the current conditions will effect your mortgage refinance.

Reasons to Refinance During COVID

Homeowners consider refinancing for a lot of reasons, some by choice, while others by necessity.

One of the primary reasons to refinance during COVID is to take advantage of current lower interest rates. Lower interest rates reduce your monthly payment and allow you to pay less over the life of your loan.

If you’ve improved your credit score since getting your mortgage, you may be able to refinance at a lower rate and save money.

COVID-19 has made many families take a closer look at their finances and reconsider their debt obligations. If you have the additional funds, refinancing can move you from a 30-year mortgage to a 15-year mortgage.

Decreasing the loan term, increases your monthly payment. However it also significantly lowers the total interest cost of the loan and getting you debt-free faster.

Anther refinance option is a cash-out refinance mortgage. If you need additional cash for unexpected medical expenses, remodeling or repair costs, or to make up for the temporary loss of income due to the pandemic, a cash out refinance may be an option for you.

This process allows you to borrow money using the equity you’ve built in the home.

COVID-Specific Cautions

When looking to refinance during COVID, it’s important to approach the process with some caution. While the pandemic should not prevent you from refinancing, it should play a part in the decision-making process.

Interest rates may go down, interest rates can also be quite volatile during times of crisis. They may turn very quickly during the loan process. Some lenders may not allow you to lock in a rate until late in the underwriting process.

Expect extra cautious steps by lenders not historically taken before the pandemic. For example, with the rate of unemployment claims, your lender may ask for a second employment confirmation check (sometimes right before closing out the process) to ensure you are still employed.

With the unpredictable job market, there may be drawbacks to a cash-out refinance. You may want to preserve your home equity in case of potential layoff or other unforeseen financial difficulties.

If your refinance company does not offer a fully online service, COVID-related shutdowns may impact your closing timeline. Luckily, increasingly more companies are adapting to the new environment, making in-person meetings less necessary.

How to Refinance My Mortgage During COVID

Once you’ve made the decision to refinance, there are a series of steps you need to take when approaching your Texas mortgage company.

Start your application online, by phone, or in-person depending on the options provided by your chosen lender.

Expect to provide similar documentation as when you purchased the home. These will include a credit score, proof of employment in the form of tax returns, W-2s, and payment stubs, and a list of current assets.

Your lender will also review your current debts to pull a new debt-to-income ratio. The updated ratio ensures you can afford the new loan. This is relevant if you are applying for a cash-out refinance or if your monthly payments will go up.

Once your paperwork is submitted, your application moves to an underwriter for review. From underwriting, you will enter an appraisal process on your home to determine its worth, and then finally onto closing.

If you feel now is the right time to refinance, don’t let COVID stop you from moving forward. Keep in mind that most lenders now offer socially distanced options as well as online application processes.

Even in-person items like appraisals typically involve professionals representing companies that follow all CDC best practices and general safety guidelines.

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