How to refinance mortgage
Before starting a mortgage application, find out step by step how to make the process
go a little easier. The refinance information we
provide here can be extremely helpful in how to be prepared for getting the best possible solution with
the least amount of stress.
How you affect things on your credit
Understanding your credit before hand is one of the most important things you
can do before starting the refinancing process. Most all loan programs are credit score driven,
so the higher your credit score, the more favorable the terms of the loan will be. Most
advertised interest rates are based on a 720 credit score and rates move up from there. Review your credit
before hand by contacting one of the 3 major credit reporting companies and requesting a copy of your report. If
you go directly through the reporting agency. This in most cases will not effect your credit score, and by law you can get one free from each vendor for free.
Disputes
Carefully review and dispute any incorrect information on your report. Each of the three credit reporting agencies make this extremely easy.
Pay down debt
Consider paying down any credit cards which have more than 75% - 100% of the credit limit used up. The ideal limit would be around 80% - 95% available. Keep in mind changes can sometimes take a minimum of 60 days to take effect.
Avoid credit inquires
Take care not to run more than a couple inquiries when looking for a mortgage lender or broker. With that said, do not have your credit report checked for any other type
of credit line, such as auto loan, credit card, or other non-mortgage related inquiry for at least 90 days prior. If you want to know how to drastically reduce your credit score as soon as the mortgage inquiry is made, this is the sure fire way.
Get proof of income before starting mortgage
Having a handle on your monthly income and verification phone numbers is the second most important thing to consider regarding any refinance transaction. In todays marketplace, income qualification is a must! The days of high loan to value
and stated or "UN-Documented Income" are long gone. If you don't owe very much and your home is worth considerably more, you may be able to avoid documenting income, otherwise it's a must.
Locate Pay stubs Bank statements and W2's
Have 2 of your most recent pay stubs handy, and be ready to provide any that you receive between the time you start the refinance process and the time you close. Also have the last 2 years of your employer issued W2 statements. If your unable to locate any of your statements, make a visit to your local
IRS Office and request a copy. You can alternatively document your income using 1099's with filed tax returns, or 12 to 24 months worth of bank statements. So have these items ready to prevent waiting on any delay caused by third parties locating and delivering this to you.
Appraisal is part of process
Once your mortgage has been approved you will be required to obtain an appraisal in most cases. Its a good idea to contact an appraiser before hand and attempt to get
a realistic estimate on the value of your home. This can be done by asking the appraiser his opionion on what he or she feels the value might be. Then suggesting that you will recommend to the lender or broker, that he will be used for the actual transaction. Otherwise visit Zillow.com and attempt to get an idea of what your home will be worth.
The cost of the appraisal will be between $250 and $350 dollars. Most mortgage companies will require you to pay this at the time the appraiser comes for the visit. Make sure your loan has been approved before hand and that your lender or broker has an opionion of value along the lines you have found before you pay for this expense. Once you complete the appraisal you cannot get your money back.
While there are several things in addition to this you should consider. These 3 things address the fundemental princials of lending known as the 3 C's. "Cash", "Collateral", and "Credit". Having a firm grip and understanding of these items will make the world of difference in your transaction.