Refinancing a home may not be as stressful as securing your first mortgage, but it is still an involved process. The following five tips can help you refinance with confidence.
1. Set a Goal
It's important to know what your goal is for the refinance. For many homeowners, the goal is a lower payment or reduced interest rates, or perhaps to extract some equity from the home. For others, the purpose is a combination of lowering the interest and shortening the loan term, even if this will result in a higher payment each month. Depending on your reasons for refinancing, the type of loan product you choose will vary, thus affecting the type of refinance you should shop for.
2. Check Your Credit
Just like when you originally applied for a mortgage, you will want to show the banks the best possible credit score possible, along with a low debt to income ratio. Pay off any outstanding debts that you are able to, and make sure there is nothing on your credit report that will raise alarm bells. It's best to start this process at least six months before you plan to apply for a refinance, particularly if there is anything problematic on your report.
3. Get an Appraisal
The bank will require an appraisal before they will approve the refinance. If you have done any major renovations or improvement to the home, it is well worth it to schedule your own appraisal so you have a realistic view of the home's worth in case you need to plead your case for a higher home value with the bank. You should also consider your own appraisal in preparation of refinancing if property values have undergone drastic increases since your initial purchase.
4. Research Your Options
There are a variety of refinancing loan products available. For example, rate and term refinancing loans are aimed at homeowners hoping to lower interest rates, payments, loan terms, or a combination of the three. Cash out refinance products are specifically tailored to those that need to access some of the equity in their homes. Know which products will best fit your needs so you can be sure to compare options accordingly.
5. Reach Out to Lenders
Once you are ready, reach out to a variety of lenders. Your first option will be your current mortgage holder, but don't hesitate to research options at your bank, through local credit units, and through other refinancing loan centers. This way you can compare options and costs. Closing costs and fees, for example, can vary greatly between lenders.
Contact a home refinancing loan center for more info.
When you start thinking more seriously about how to manage your finances, it is worth saying how important it is to find the perfect loan. While the right loan could help you to pay down debt without worrying a lot about the repercussions, the fact of the matter is that some people don't research loans as extensively as they should, causing problems. The purpose of this blog is to find great loans that could help you along the way. Check out these posts that talk about everything from narrowing down loans to identifying ways to identify lower interest rates. Check out this information to make sure you have what you need.