How To Prepare For A Mortgage Refinance

Now is a perfect time to determine if you are in a position to take advantage of these record low interest rates. If you choose to refinance you may be able to reduce your monthly mortgage principal and interest payment or the term of your loan.

According to mortgage lenders, one of the main factors in determining the interest rate for a mortgage refinance is your credit score. You may not be able to do much about your home’s current value, or a lender’s underwriting guidelines and standards, but there are options available to help you improve your credit score and increase your chances of getting a mortgage loan refinance approved.

How to Prepare for a Mortgage Refinance

Mortgage lenders pay particular attention to your financial activity in the months preceding and during your refinance. Be careful of the money you spend during this time. Any new debt you incur could negatively impact your ability to successfully refinance your home loan.

Make sure you have thought through the reasons for your refinance. If you want to take cash out of your home, mortgage lenders will want to know what you plan to do with the money. Are you funding a college education? A second home? A home remodel?

Whatever you plan to do, make sure you understand what it will cost. Check your financial institution’s web site for handy calculators that can help you put together your plan. A qualified mortgage lender can help answer questions about the refinance process and underwriting standards.

You’ve Determined a Mortgage Refinance Makes Sense – Now What?

To give yourself the best opportunity for a refinance approval and a competitive interest rate, plan well in advance and make an appointment with a qualified mortgage lender to discuss the options available. Make sure you have checked your credit report to ensure your payment history is correct. Just one missed payment can have a negative impact on your credit score. Making corrections to your payment history can take time, so it’s important to review your credit report often and make corrections as needed.

Another item to consider is to reduce your debt level as much as possible prior to loan application, especially your credit card balances. Your credit score will factor in how much available credit you have. If you’re maxed out on one or more cards, your credit score will be impacted. Some mortgage lenders recommend keeping credit card balances to no more than 30 percent of your available credit.

In addition, keep your oldest accounts open. Closing accounts often has the opposite effect of what people think. The longer your credit history, the better. Don’t apply for new credit in the months prior to your refinance application; mortgage lenders may see this as potentially over-extending yourself.

Working at raising your credit score is the best thing you can do to help you get favorable refinancing terms and a loan approval. If you prepare carefully, you’ll be in a better position to take advantage of today’s low mortgage interest rates that can save you huge amounts over the life of your loan.

Article Source: sooperarticles.com/finance-articles/mortgage-articles/how-prepare-mortgage-refinance-750727.html

About Author:

Bret Pippen is a contributing editor and is the head of advertising and customer communications for Regions Bank, one of the nation’s largest full-service providers of consumer and commercial banking products and services. Learn more about mortgage lenders by visiting regionsbanklending.com/personal-and-family-growth/mortgage-a-home-equity/before-you-refinance.html.Author: Bret Pippen