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7 Steps to Take to Refinance Your HomeOctober 15, 2019
Many individuals think that refinancing their home is easier than buying a house; however, it may not always be that way.
Why do you want to refinance?
This is the first question you must ask yourself before you go about the process. Certain individuals refinance with the aim of lowering monthly interest payments. However, by refinancing with another 30-year full-term loan, they often end up increasing the time required to pay off the house. Moreover, even the total amount that they pay as interest increases.
The ideal aim in refinancing should be to reduce the term of the loan as well as the interest rate. To determine whether it is really worth refinancing your mortgage, compare what you’ve paid in interest so far and what you will pay on your current loan, to what you’ll end up paying if you refinance.
Steps to refinancing a home
Now that you are clear about why you want to refinance, let’s take a look at the steps you must follow to achieve the same:
- Understand your goal: As explained above, the ideal goal would be to lower your loan term, as well as your interest rate.
- Find out your credit score: Check your credit history and obtain your current credit score – the better your score, the better the terms at which you can refinance.
- Check your home’s current value: For this purpose, you can research the sale prices of similar homes in your neighborhood.
- Shop around for mortgage rates: You can research this as much as you want online. However, when it comes to actually applying for the loan, limit your applications within a two-week window to minimize any negative impact on your credit score due to hard inquiries.
- Know the costs involved: You’ll have to cough up various fees which may include application fees, the cost of an appraisal, origination fees, a document processing fee, an underwriting fee, a credit report charge, title research and insurance, recording fees, tax transfer fees and points, and so on. So, remember to compare these items on various Loan Estimate Forms before you pick your lender, and then check with the lender to see which fees apply to your situation.
- Lock in the rate: Once you’ve decided on your lender, you must gather all the necessary documents required by them. Then, you must lock in your rate. Locking in your rate means that the new refinance rate offered to you cannot change during a specified period prior to closing.
- Arrange for cash: There are certain expenses you’ll need to pay while closing, such as property taxes and insurance, closing costs, etc. These, you must have in hand so that you can cover the stated costs easily. You’ll get an idea from your loan estimate form as to what this figure will be, so there won’t be any surprises. If you don’t have the amount at hand, you can add the costs to the mortgage balance. However this option is not advisable as it will increase what you owe on your home.
In case you don’t have the necessary closing costs at hand, you can always approach our team at Fund&Grow. We offer individuals with good credit the option to obtain $50,000 - $250,000 of unsecured credit at 0% interest through creative credit card financing. Available for a period of 6, 12, or 18 months, this amount can be used for anything from funding a small business to providing a down payment on a property. So, if you need help in this regard, call us at (800) 996-0270 and we will help you overcome your refinancing hiccups.