How To Refinance A Home Loan

If you are currently making payments on your house, it is a great idea to know how to refinance a home loan. Refinancing can save you money in the long run. However, there are some factors you must consider before doing so. You will make the right decision by following my instructions on refinancing a home loan.

To refinance a home loan, you will need:

• Proof of income (paycheck stubs, W2s, 1099s)
• Monthly debts (mortgage, revolving credits, etc.)
• Savings (bank account and investment statements)
• Tax returns (the current one and the ones from two previous years)
• Credit reports (from all three major credit bureaus)
• Internet
• Lender
• Loan officer

1. Figure out how much you can save. You should know the amount of money you will save by refinancing your home loan. First, do some research online to see what the current mortgage rates for refinance are. Next, find out the length of loan that you want. Now, use a mortgage calculator to calculate the monthly payment. If this amount is less than the current payment, then refinancing your home loan makes sense!
2. Meet the refinance qualifications. Although refinancing is good news for you, you still need to qualify for it. You should know the amount you owe on your current mortgage and the amount your home worths. In order to qualify for refinancing your home loan, all the homeowners must have a 80% Loan-to-value (LTV) ratio. Nevertheless, the LTV ratio may vary depending on the type of loan you go for. The LTV ratio is 125% for the affordable government program, 97% for FHA and 100% for the veterans. To calculate the LTV ratio, you just have to divide the mortgage amount by the home value. If the LTV ratio is too high, forget refinance! If you have bad credit, it is impossible to refinance your home loan. The higher the credit scores, the better rates and fees you will get.
3. Select a lender with good reputation. Once you find out you qualify for refinancing your home loan, now is the time to search for a lender using the Internet or just asking around. Make very sure the lender is trustworthy and reliable. After you sign up with your lender, their loan officer will help you with the refinance process. Prepare for the required paperwork such as your proof of income, monthly debts, savings, tax returns and credit reports. Note that you will be paying for the closing costs, and they are not much different than the first time you bought your home. If you have any questions and concerns, do not hesitate to ask your loan officer.

With the help of these instructions, you can see how easy it is to refinance a home loan. By confirming your refinance qualifications, you are on the way to save some money for owning a home.