In today’s economic environment there are few things to get excited about. But, if you are looking to refinance your mortgage, there has never been a better time to do so, at least in terms of interest rates. Thanks to the sluggish economic recovery, interest rates are lower than they have ever been, making now the time to refinance your home. So, if you are ready to drop your mortgage interest rate a few points, fire up your computer and let’s get started.
The first and probably most important step in attempting to refinance your mortgage is to truly understand your current financial situation. Along with your ability to prove a stable income and having the cash to pay closing costs and a down payment where necessary, you will need good credit. If you have a credit score of less than 640 you will have problems finding a lender willing to work with you to get your home refinanced. That’s not to say that it’s impossible, yet it will be difficult. Get a copy of your credit report from all three credit bureaus, review them and dispute any and all inaccuracies. If your credit score is still struggling thanks to some late or missed payments, postpone your refinancing until you improve your score. You can improve your score by making all of your payments on time every month as well as paying off accounts and reducing your liabilities.
The second step in getting your mortgage refinanced is to understand how much you qualify to borrow. In many areas of the country, many people owe more on their original mortgage than their houses are currently worth. If this is the case for you, you will need to be prepared to pay the difference between the value of your home and the upper loan limits for the lender you choose in cash. The easiest and most efficient way to figure this out is to utilize the mortgage calculators that are available online. These calculators will help you get an idea of what your home is worth, what an average lender is willing to lend on your home and whether or not you will have the cash to help bridge the gap.
Gather up all of your existing loan documentation as you will need it in order to compare your existing mortgage to the new ones. You will need to know what your current interest rate is, how much equity you have in your home, how much longer you have to pay on your existing loan as well as whether or not you have a prepayment penalty. Each of these factors will weigh into your decision about what loan product, if any, are right for your refinancing needs.
Now that you have your affairs in order, it’s time to start scouring the Internet for potential lenders. When it comes to making your short list, it’s best to stick with well-known and well established companies. This saves you from winding up providing your confidential information to identity thieves or other Internet scam companies.
Next, you should complete the online pre-qualification processing with the companies you have listed from the prior step. The reason is because you want to make sure that you will qualify for a loan with the companies you are applying with. This step prevents you from having your credit report pulled by companies who won’t be able to help you and preserves your credit score for those who can. Plus, it doesn’t hurt that this process does not require you to much more than complete a relatively simple online form instead of submitting to a lengthy application process.
After you have completed the online pre-qualification process, most reputable online mortgage lenders will send you a list of mortgage products you qualify for and their associated interest rates. This is where being meticulous really counts. In order to make sure that you are choosing the right product, you have to not only compare interest rates and fees between the loan products being offered, but you also have to measure these against your existing loan. In order to be worth the time, effort and expense necessary to obtain a new mortgage, the interest rate, closing costs, PMI, and down payment should be significantly less expensive over the long run than your current interest rate.
Lastly, pick your lender and your loan and complete the online application. The main point to remember with any mortgage, but even more so with online mortgage lenders, is to get everything in writing. This allows you to remove any confusion later on in the process.
