The process of refinancing in Illinois is similar to other states and requires you to submit a new application, provide financial documentation like tax returns and pay stubs, and go through an underwriting process. Lenders will evaluate factors like your credit score, debt-to-income ratio, and home equity.
For a conventional refinance, you’ll generally need a good credit score and at least 20% equity in your home to avoid paying private mortgage insurance (PMI). There are also specific programs, like the FHA Streamline refinance, which may have more lenient requirements for those with existing FHA loans.
There are a couple of main types of refinancing available to Illinois homeowners. A rate-and-term refinance is used to change the interest rate or the length of your loan, for example, moving from a 30-year to a 15-year mortgage to pay it off faster.
A cash-out refinance allows you to borrow more than you owe on your current mortgage, giving you the difference in cash. This is a popular option for homeowners who want to use their home’s equity to pay for things like home renovations, debt consolidation, or other large expenses.