It might feel like the economy is holding everyone down, we are sure sick of the economic doom and gloom, but you shouldn’t be. Many homeowners are taking advantage of historic low rates by refinancing mortgages. Right now is the best time for homeowners to refinance and capitalize on the significant interest savings.
Other homeowners might be refinancing mortgages because they fear future interest rate increases on their adjustable rate loans, but if that’s not situation, refinancing a mortgage is likely to be a smart decision.
Listed below are five steps to help you through the mortgage refinancing process.
1. Know Your Situation. Mortgage refinancing should be based mainly on the calculated numbers i.e. money saved. For example, a mortgage with an interest rate that is only 0.5% lower than your current rate can save you up to hundreds of dollars each month. Still you must consider the upfront costs involved and risks. Given this you should plan to remain in your home long enough to pass the break-even point then if necessary cash-in selling the home.
2. Gather Your Documents. Remember, most great things always come with work so be prepared to fill out a good amount of paperwork and provide credit score reports, income, tax and bank statements. You might also want to check your credit score before you apply. The best refinancing rates are only offered to borrowers with excellent credit ratings.
3. Shop around. The Internet is a powerful tool, use it to locate and research the best lenders and lowest rates available. Be sure to apply for quotes on mortgage refinance loans at least 3 or more lenders. If you already have a solid relationship with your current lender than try it first. Once you receive an offer, compare it to several others – due diligence. Remember, you do not have to limit yourself solely to traditional banks. You might try shopping for refinancing loans from credit unions or mortgage brokers, as well.
4. ASK for statement of fees and terms prior to agreeing. All refinancing loans have up-front costs for application processing, appraisal fees and closing costs that could be several thousand dollars or more. As you compare loans, ask each potential lender for a detailed accounting of all fees associated with their financing mortgage. By law, all lenders must provide you with an estimate of fees within three days of receiving your application.
5. Stay focused on the details. After you have decided on the right mortgage loan for your needs, remember that mortgage rates fluctuate on a daily basis. To prevent the rate you were initially offered from rising, ask your lender to lock-in the rate until you close on the loan. Further, maintain enough cash on hand to cover closing costs and leave your-self a little extra security blanket savings for emergency situations. Keep in mind, the lenders estimate is not exact so you don’t want to be caught off-guard if the estimate was too conservative.
Remember, doing your homework before you step in to a mortgage refinance will save you from stress, and will prepare yourself for faster savings.
