10 Mortgage Refinancing Tips

With so many options, finely printed documents, and economic issues, homeowners need 10 mortgage refinancing tips for guidance.  These tips will help you get through the mortgage loan process and get a mortgage refinance loan that works for you and your specific situation.

1. Do not change jobs during the mortgage loan process.  Once you make your initial application those details determine the mortgage loan programs for which you qualify.  Underwriters will verify those details and switching jobs will either delay the loan or cause it to be declined. Also, if you have applied for the loan based on a standard 40 hour work week—do not suddenly drop to a part time schedule as this will change your income used to determine your ability to repay the loan.
2. Continue to make all of your scheduled bill payments on time.  Even if a credit card or mortgage is to be paid off in your new mortgage loan, you must continue to make those payments until the refinance cash-out pays them off!  Otherwise you risk damaging your credit score and becoming ineligible for the loan!  Closings may even be rescheduled at the last minute—so be prepared to make payments on obligations that are near, or soon after, an anticipated closing date!
3. Ensure that your home is appraisal ready.  In most situations, your home will need an updated appraisal.  Make sure that all home improvement projects are completed and that the house is as tidy and in order as possible.  During mortgage refinancing, your home is being “interviewed” by the appraiser and “re-interviewed” by a loan underwriter.  The appraisal and photos can certainly deter an underwriter from allowing the lender to take a risk on your refinance.
4. Use your future plans to select the best loan options for your situation.  For example, if you expect to move in two or three years—there may be mortgage loan options with lower short term interest rates than refinancing to a standard 30 year fixed. 
5. Paying points is not always a bad idea.  If you are planning to live in the house for a long time, it may make financial sense to pay points.  The purpose of buying down the interest rate (or paying points) is to lower the rate and lower loan payments by paying an up front fee.  If you plan to own the property long enough to regain this up front fee through the payment savings, paying points may benefit you.
6. Compare lender rates, fees, and loan processing times.  Make sure that you get rates and closing costs from at least three different lenders.  Money will be made on your refinance—either through points, fees, rate or a combination, so it’s your job to find the best loan for your situation at the lowest price.  If options are similar, but one company has a much longer processing time, choosing the faster company will get the loan closed—and cash out or monthly savings—sooner.
7. Read and understand all documents.  Mortgage lending regulations require that lenders provide a lot of documentation to you throughout the loan process to protect consumers.  If you do not understand the forms—do not be afraid to ask questions!  Rates and terms are presented to you prior to closing, so there should be no last minute surprises if you have understood documents that you signed throughout the process!
8. Shop title company fees.   Built into the settlement costs, the title company will also have charges for their services.  These charges can vary greatly, so if you have a relationship with a specific company or have closed a mortgage loan in the past 10 year, you may qualify for discounts.
9. Do not take on new debt during the loan process.  New debt will change your debt to income ratio and can disqualify you for a loan.  New credit inquiries may also lower your credit score!
10. Research businesses thoroughly.  Check out all of the businesses to which you will be giving your personal information.  Make sure they are reputable by contacting the Better Business Bureau or your state’s Attorney General’s Office.

Resource:

Federal Reserve