Should I refinance?
 
Whether or not it is worthwhile to refinance depends on many variables. The questions you need to ask yourself are, first, how long will you be in your home, second, how does the interest rate you're paying today compare with market rates.

The most common reason for refinancing is to save money. Saving money through refinancing can be achieved in two ways: 
 
1. By obtaining a lower interest rate that causes one's monthly mortgage payment to be reduced.
2. By reducing the term of the loan, thus saving money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total of the payments made during the life of the loan can be reduced significantly. 
 
People also refinance to convert their adjustable loan to a fixed loan. The main reason behind this type of refinance is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments. 

What is PMI?
 
Private mortgage insurance, or PMI, insures the lender against a default. It is required when the borrower is making a cash down payment of less than 20 percent of the purchase price.

PMI costs vary from one mortgage insurance firm to another, but premiums usually run about 0.50 percent of the loan amount for the first year of the loan. Most PMI premiums are a bit lower for subsequent years. The first year's mortgage insurance premium is usually paid in advance at the close of escrow, and there is usually a separate PMI approval process.  
 
What is an ARM?
 
An adjustable rate mortgage (ARM) is a loan where the rate is fixed for a certain term, usually 1, 3, 5, or 7 years and can change up or down after the fixed period. The rates on ARMs are usually lower than fixed rate mortgages.  
 
What documents are required to process my loan?