Things are changing, and your home mortgage is no different. Over time, the interest rate of your mortgage may change especially if you took out a mortgage with an adjustable-rate.
Nowadays, there’s a myriad of choices of financing options available for borrowers. Considering the low-rate environment, it is wise to refinance your current mortgage now.
If you have a 30-year mortgage, you can have it changed to a 20-year term by applying for a 20-year fixed refinance rate which offers a lower interest and potentially saving you more money in the total cost you’ll pay, and an earlier payoff date so you’d be debt-free sooner. To help you successfully refinance your home mortgage, below are some steps you can follow. We hope that they will help you figure out if refinancing is the right move for you.
Steps on How to Successfully Refinance Your Home Mortgage
1. Review your credit.
Your credit score is very important in determining if you can refinance your home mortgage. To qualify in refinancing, your debt-to-income ratio must be 36% or less, and your credit score must be at least 760. To ensure that the loan you will be getting will suffice your needs, research interest rates, terms, and refinancing costs, including the points and if you need to pay private mortgage insurance.
The reason for refinancing is to decrease the fixed interest rate to lessen the payments over the loan’s life.
2. Know your available equity
If you have at least 20% equity, it will be easier for you to qualify for a new loan. You can tap into your home’s equity and take out a larger loan with cash-out refinancing. The best way to know if you qualify for this particular program is to go to a lender and discuss your needs.
3. Choose the best lender
In choosing the best lender, it’s important to consider many options. Instead of settling to the first lender, you will find, you should shop around and compare their rates and terms before finally choosing one. Each lender has different criteria in imposing interest rates and you might miss out on a lender that will give you a lower rate if you don’t research enough. It is also important to check reviews and ask people about their experience when they refinanced their mortgage to give you advice or recommendations.
4. Get a loan estimate.
Before applying for a loan, it’s necessary to get a loan estimate. This will help you evaluate other loan’s costs and compare them, in this way you can decide which one will fit your finances. Getting a loan estimate doesn’t necessarily mean you have to proceed with the particular loan, it’s only a way to understand the details before you finally move forward. In order to compare loans and see which one you will qualify for, you can ask for two or three quotes from mortgage lenders. You can also enhance your negotiation skills while seeking to lessen the costs of interest and fees.
5. Prepare the requirements and apply
While you shop around to get the best loan for you, it’s also important to get your papers ready. Most lenders usually respond instantly to your application. Getting all the necessary requirements beforehand will speed up the transaction when you already found the best loan for you. This will avoid any delays and you can smoothly move forward with your chosen lender.
It is not a bad idea to consider refinancing your mortgage as long as it won’t put your finances in a difficult situation. Just make sure to weigh the pros and cons, and evaluate your situation if this is the best course of action.
