What are the Steps Involved in Refinancing your Home?
Refinancing can seem like a tempting solution to high monthly costs or a tight budget, but it is not always an ideal decision. Sometimes the housing market is not perfectly positioned for refinancing, and sometimes even if the market is fair, fees and taxes could make your refinance less helpful than you originally thought. Make sure to consider the following steps before you determine whether refinancing your home is in your best interest.
1. Figure out your Ideal Rate
Before you even begin the process of researching refinance options, sit down with your family or partner or a trusted advisor and determine what your ideal mortgage rate would be. Consider your monthly budget, including all home costs such as title insurance, home insurance, etc. as well as what you would like to be paying for your mortgage, as well as what the maximum rate would be to make refinancing worth it. Doing so will help you narrow down your search for lenders and other options, because you can easily rule out those with a higher rate than you are seeking.
2. Do your Research
Not all mortgage lenders are the same, and choosing the right one can make all the difference in your refinancing process. Just as when you are choosing a lender for your initial home mortgage, do your due diligence by researching and getting quotes from multiple sources. Remember too that sometimes the sticker price can be deceptive, so dig deep when investigating different rate and consider what the actual, final cost of the refinance would be with each lender.
3. Read the Fine Print
Once you’ve narrowed the field of potential lenders, it’s time to look even more closely at the specifics of their requirements for a refinance. Specifically, what it is actually going to cost you. Make sure to ask about the fees and taxes involved in the process of refinancing, and read all of the documents they give you carefully, including the fine print at the bottom. Before you sign everything, check and double-check that you know exactly what you are paying for and how much it is going to cost.
4. Keep your Credit in Check
After committing to refinancing your home, be sure to keep track of your credit activity just as you would when getting a mortgage the first time. Major purchases or new credit cards can impact your credit score, which might drastically impact your interest rate, or potentially even disqualify you from your refinance mortgage altogether. Keep your finances in check until all of the paperwork is signed, finalized, and your refinance is complete.