Refinancing a mortgage loan is a step that many homeowners take in order to renegotiate their terms or switch mortgage companies. A refinance allows you to take advantage of lower interest rates or to extend the life of your loan and reduce your monthly payment. Below are the major steps you need to take to refinance your current mortgage loan.
- Find a good rate. Why are you refinancing? Is there a problem with your current lender and its policy or are you just looking to take advantage of low market interest rates? These questions will help you determine whether or not you want to switch lenders. If a change is for the best, the first thing you will want to do is determine what kind of competitive interest rates you can find and who can give them to you.
- Pre-qualifying and checking your credit. As you did when you first received your current mortgage, you will need to fill out pre-qualifying applications for the lenders whom you are interested in, to determine what kind of rate they may be able to give you. Also, as with your first mortgage, your credit score and report will play a significant role in what kind of rate you will be able to receive and your lender will also look closely at your past payment history on your current mortgage. Now is the perfect time to look at your own three credit reports -- from TransUnion, Experian, and Equifax -- and your three FICO scores, so that you can correct any inaccuracies and know what your new lender will see before your reports get pulled.
- Choose your lender. Once you have the rates in your hand, you can then determine which lender you want to refinance with. You will still need to fill out the real application in order to become fully qualified and begin looking forward to closing your new loan. Your lender may want to get an official estimate on the property to determine how much it is currently worth and how much equity you have built up in it. The equity you have could be an important factor to your lender if you have arranged for a refinance that requires little to no money down at the time the loan is closed.
- Closing your mortgage. Putting the final touches on finalizing your new loan should be a smooth transaction, since there will not be a seller or exchange of property. Additionally, any closing costs should also be considerably less than an original loan. Once your mortgage has closed and your previous lender has been paid, you will begin making your monthly payments to your new lender and reap the rewards of your refinance.
Since you have already been through the mortgage process before, refinancing your loan should be easier and less stressful. Also, unlike an original mortgage which is adding payments and additional responsibility into your life, refinancing will help to reduce your payment stress and give you a manageable rate to work with. For these reasons, you should not be scared of going through the mortgage process once again, as refinancing is one of the more positive things you can do for your financial situation.