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Back to Basics: Purchase Vs. Refinance

Jul 20, 2021

Mortgage loans are some of the most important decisions you will make in your life. Homeownership is one of the American Dream's most significant accomplishments, and homeowners take pride in their homes, reflecting who they are. Homeowners should consider what type of mortgage loan to apply for before jumping headfirst into buying or refinancing.

 

The Two Types Of Loans:

There are two types of mortgage loans, purchase mortgages and refinance mortgages.

 

Purchases:

A purchase loan is a mortgage in which you generate a new loan to buy a home from a seller. This mortgage will come with both a down payment and closing costs. While any mortgage should be decided upon cautiously, much more can go wrong during purchase as you are funding the place you will live moving forward.

Make sure that when you shop for a purchase mortgage that you compare lenders on the following:

  • Their fees
  • Closing turn times
  • How smooth of an experience you will have
  • Their communication abilities
  • Interest rates
  • Their expertise in the industry
  • If they are local
  • If they have weekend support
  • How well they work with your real estate agent

 

Refinances:

A refinance home loan allows homeowners to get a new mortgage with better interest rates and terms. Homeowners should consider refinancing if their current home loan has an adjustable rate, higher than the average monthly payment, or is just too high for the market value of your home.

There are two types of refinances. A rate & term refinance, and a cash-out refinance.

 

Rate & Term Refinances:

A rate and term refinance lets homeowners refinance their mortgage without taking out of a home's equity. Benefits of a rate & term refinance can include:

  • Shortening the length of your loan
  • Dropping your interest rate
  • Changing to a better loan product
  • Dropping monthly mortgage insurance

 

Cash-out Refinances:

A cash-out refinance homeowners to take money from their home's equity and use it for various reasons. These reasons can include:

  • Renovating your home
  • Paying down credit card debt
  • Putting kids through college
  • Putting the money in an investment with a higher rate of return

 

Picking The Right Lender:

When picking the right lender for your purchase or refinance, it's essential to understand what they specialize in. If you work with a large internet lender, they may be able to help you with a refinance but will likely drop the ball on a purchase.

Conversely, it's essential to pick a lender that looks at a refinance as a potential solution, not just their next sale. When considering a refinance, you will need to work with a lender to trust for solid advice and planning.

There are many different factors to consider when looking for a mortgage, but picking the right lender is what makes all the difference. If you're still unsure which, loan type would be best for your situation, give us a call or fill out our easy online form today. We'll help guide you through the process so that it's as simple and stress-free as possible! Click here and get pre-approved today.


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