Refinancing Your Home in Texas: What You Need to Know
- Aug. 2, 2023
- New American Funding
- Home Loans
Refinancing your home in Texas doesn’t need to feel like a guessing game. Refinancing allows you to replace an old mortgage with a new one that can have more favorable terms and rates. In some cases, you can refinance your home after a six-month waiting period. Homeowners in Texas may be able to achieve a wide range of benefits by strategically refinancing over time. Consider the benefits and potential drawbacks of refinancing your home to determine which option might be right for you.
How Often Can You Refinance Your Home in Texas?
You may be able to refinance your home in Texas about once a year, but the exact timeline varies depending on your eligibility. Eligibility depends on factors like your credit score, equity, loan type and debt-to-income ratio (DTI). A DTI ratio indicates to a lender the likelihood that you will be able to repay your loan. Available loan types include Federal Housing Administration (FHA) loans, Department of Veterans Affairs (VA) loans, and Conventional loans. Texas allows borrowers to select from different types of loans during their refinancing journey.
A Home Equity Line of Credit differs from a typical refinance because it does not replace an existing mortgage. New American Funding has several types of refinance loans and refinance alternatives so be sure to research your options.
How Soon Should You Refinance Your Texas Home
In Texas, you generally need to have the mortgage loan for a minimum of six months before refinancing. It’s common to wait at least six months when refinancing with the same lender due to set minimum requirements. However, it’s possible to refinance in less than six months in certain circumstances if you decide to work with a different lender.
How Much Does It Cost Each Time You Refinance?
When refinancing, consider fees such as closing costs and taxes. In Texas, closing costs hover around 2% of the loan balance. Since your lender will be evaluating your home the same way they do when you go through the initial approval process, some of the costs will be the same. These include things like an appraisal fee, an application fee, and insurance.
Keep in mind that refinancing temporarily lowers a credit score. A decreased credit score might cost you favorable terms and rates when navigating other sizable purchases.
5 Advantages of Refinancing Your Home More Than Once
Refinancing your home more than once in Texas may offer benefits ranging from lower interest rates and different loan terms to decreased mortgage payments. Texas does not have an official limit on the number of times you are able to refinance a single property.
Mortgage lenders provide mortgage calculators, blog posts, and market news to better inform potential customers. Speak with a lender like New American Funding to decide whether promptly refinancing is the right choice for you.
Five advantages of refinancing your home include:
1. Lower Interest Rate
Refinancing your home multiple times can potentially allow you access to lower interest rates. For example, you may be able to get better interest rates if current rates are less than the rate on your mortgage. Research current rates to recognize when it may be useful to refinance.
Interest rates are often impacted by factors such as inflation and monetary policies implemented by the Federal Reserve. Lower interest rates may be able to decrease mortgage payments. Lower mortgage payments and interest rates provide you with the opportunity to pay less over time.
2. Change Your Loan Term
Refinancing may provide you with the flexibility to select a shorter or longer loan term. The loan term indicates the length of time necessary to repay a loan. Shorter loan terms provide more attractive interest rates. One benefit of having a long-term loan is that it gives you a lower monthly payment. Loan terms vary significantly.
Changing your loan term can also stabilize your monthly payments. For example, if you choose to refinance from an Adjustable-Rate mortgage to a Fixed-Rate mortgage your interest rates will stop fluctuating with the market. This will keep more monthly payments more predictable. They are available for various periods between 10 and 30 years depending on the loan type and your individual circumstances.
3. Turn Equity Into Cash
A Cash-Out Refinance gives you the ability to use the equity built into your home. Equity is often considered the portion of your home that you fully own. In general, equity may be calculated as the difference between the value of your home and how much you owe to lenders.
A Cash-Out Refinance works by replacing your old loan with a new loan while giving you access to the difference between the two. The process typically allows you to convert the available equity into cash. It’s important to know that Texas restricts cash-out refinances to 80% of the value of the home.
4. Lower Your Monthly Mortgage Payments
You may be able to achieve lower monthly mortgage payments by securing a better interest rate or by extending your loan term. Lower interest rates allow you to pay smaller monthly mortgage payments. Paying less provides you with the opportunity to focus on saving for other opportunities. For example, you may be able to save for housing-related purchases such as renovations and updates or personal goals like continuing education.
5. Eliminate Your Private Mortgage Insurance or Mortgage Insurance Premium
People with private mortgage insurance (PMI) may be able to eliminate related costs during refinancing. For example, you may be able to remove PMI or mortgage insurance premiums if your principal balance is 80% or lower than the value of your home. The value of your home is usually based on the fair market value relative to market conditions.
4 Things to Consider Before Refinancing Multiple Times
Before refinancing multiple times, review key considerations that may impact the quality of your refinance experience. Research the standards set by your lender like New American Funding, have a strong understanding of your closing costs, and know the potential impact that refinancing may have on your equity. Avoid potential fees by inquiring about prepayment penalties. Research your options and ask your Loan Officer any relevant questions to find out if refinancing is the right decision for your needs.
Four things to consider as think about refinancing include:
1. Meeting the Credit Standards of Your Lender
Lenders like New American Funding have different credit standards designed to indicate a borrower’s creditworthiness. Find out your credit score to determine whether you may be eligible for more favorable terms and rates. Typically, lenders recommend credit scores above 620 to begin the refinancing process for Conventional loan. For FHA and VA loans, credit scores can be as low as 500 in certain circumstances.
2. Paying Closing Costs Again
Closing costs may add up over time. Closing costs are fees usually paid at the end of a real estate deal. The closing fees typically include more than one charge. For example, they may include a loan origination fee, appraisal fee, and taxes. Closing costs in Texas are usually about 2% of the loan amount for refinancing. They must be paid every time you refinance.
3. Incurring Lost Equity
When refinancing, various components may impact home equity. For example, a straight refinance can indirectly impact equity for many reasons, including the results of the lender appraisal and fluctuating property values in your immediate area.
Cash-Out Refinances directly impact equity. A Cash-Out Refinance happens when you take out another mortgage in an effort to pay off a current loan. New American Funding offers a vast selection of refinancing opportunities that may be able to help you make use of your equity.
4. Paying Prepayment Penalties
You might face a prepayment penalty if you pay off your loan early. Examine the various refinancing opportunities and consider selecting one that doesn’t charge prepayment penalties.
Refinance Opportunities Provided by New American Funding
New American Funding may be able to help you refinance. Refinancing can place you in a more favorable position by allowing you the opportunity to have lower monthly payments. Some of the programs include:
Cash-Out Refinance loan: A Cash-Out Refinance loan may be able to help you access your home’s equity. The process includes replacing a current mortgage with a larger new one. The difference between the two loans is provided to you in cash. A Cash-Out Refinance loan may be beneficial when consolidating debt.
FHA Streamline Refinance: An FHA Streamline Refinance may be useful if an individual’s credit has room for improvement. One benefit of an FHA Streamline loan is that it does not require you to verify your income and no appraisal is required.
Review some of the refinancing opportunities provided by New American Funding to discover if one is right for you.
Refinancing in Texas: Improving Your Financial Freedom
Refinancing your home in Texas may improve your access to financial freedom. The advantages of refinancing range from lower monthly mortgage payments to more favorable interest rates. Examine what type of loan would work best for you and consider whether your credit score and financial history make you a strong candidate for refinancing. With the right resources in your financial toolkit, you may be able to build the financial future of your dreams.
Is it OK to Refinance Twice in One Year in Texas?
Although Texas does not have a limit on the total number of times that you can refinance, it has stipulations regarding the frequency of refinancing. It’s usually not possible to set up a cash-out refinance twice in one year.
How Soon can you Refinance an Income Property in Texas?
Texas typically has relaxed regulations on the number of times you can enter into a Cash-Out Refinance loan for income properties. The regulations make it possible to refinance an income property as needed, usually after a minimum of six months to one year if you use the same lender as you did previously.
Does Refinancing Affect Property Taxes in Texas?
Refinancing will not directly impact your property taxes in Texas. Property taxes are determined by the value of your property.