There is one number that is more important than any other when are trying to refinance your mortgage loan: It's your FICO score, one single number that tells mortgage lenders how well you've managed your money and paid your bills in the past. If you want to find good refinance rates, then the key is to manage your money well enough to earn a good credit score.
Homeowners often refinance their mortgage loans to pay for remodeling projects that will dramatically improve their quality of life. As long as their home has increased enough in value, homeowners should have little trouble refinancing their existing mortgage loan.
However, borrowers still need good credit scores to qualify for the best mortgage interest rates. And the interest rate on a mortgage loan can make a significant difference in how much homeowners pay each month and over the lifetime of the loan. Consider this example: homeowners who take out a 30-year fixed-rate mortgage loan of $200,000 with an interest rate of 6 percent will pay $1,199.10 every month. However, homeowners who take out the same loan with an interest rate of 9 percent will pay $1,609.25 each month.
That comes out to a difference of $410.15 each month. Over the lifespan of a 30-year mortgage, the homeowner with the 9 percent interest rate will pay $147,654 more than will the owner with the lower rate.
It's important, then, for homeowners to make sure that their credit scores are high before applying for a mortgage refinance. It's the only way to guarantee that they will find good mortgage refinance rates.
In general, a credit score of 650 or higher indicates that borrowers have a good credit history. Lenders will look at scores in this range favorably. These borrowers will qualify for the best mortgage interest rates.
Unfortunately, there is no easy way for homeowners to improve their credit scores. The only sure way to do this is to start managing their money better. It's important to pay bills on time and close unneeded credit card accounts. They should strive to never miss a credit card payment; if missing a payment is inevitable, it's important to contact the credit card company as soon as possible to try to negotiate lower interest rates or penalties to prevent a cycle of increasing debt that will result in additional damage to the credit score.
These positive financial steps, though, won't immediately improve a borrower's credit score. Borrowers must prove that they can make their payments on time over the long haul. Because of this, it might make sense for homeowners to wait until their credit scores improve before applying for a refinance loan. If it's at all possible to wait twelve to eighteen months before applying for the refinance loan while you work to improve your credit score, you'll be able to negotiate better rates - this is the best way to find good mortgage refinance rates.