With the current economic meltdown and the prolonged slump in the housing market, millions of consumers across the country are refinancing their mortgage each year. If you are also looking forward to refinance a home loan at a substantially lower interest rate, you must consider a few crucial factors first.
Remember, if you have stellar credit and ample equity available, refinancing wont a big a trouble for you, but if you have poor credit history and if the amount of your existing debt is more or less equal to the amount of money your home is worth of, things could get a little rough for you. While looking for refinancing, make sure you verify the closing cost and the interest rate involved with this new mortgage loan. Read ahead, to know what the gradual proceedings to refinance a home loan are.
Your first and foremost duty is to review your credit history meticulously, even if you refinance through your existing mortgage lender. Free credit reports are available online from www.annualcreditreport.com. While reading through the reports, if you find any discrepancy on the records or find any delinquent accounts, immediately ask for rectification. Actually, these errors can lead to higher interest rate for the refinance loan; therefore, you need to take care of them before applying for a refinance loan.
Comb the market thoroughly and ask for the market value of your home from different lenders. You might be surprised to see that the real market value of your home is not what you think its worth, rather it’s an estimation based on what buyers would actually pay for your home. Therefore, it’s best to hire a real estate agent for the market evaluation of your home. Unfortunately, if you owe more than what your home is worth, it would be difficult for you to find a decent offer of mortgage loan. In fact if you don’t have some equity built up on, you might have to pay higher interest for refinancing.
Don’t assume that your current lender will always offer you the best interest rates. Better shop around and compare different interest rates offered by different lenders, before finalizing the deal. A mortgage broker can certainly help you out in this regard. He can help you find the lowest interest rate with the best terms and lowest closing costs available.
Once you select the best refinancing option, apply for the refinance. You can apply on-line, contact the lenders over phone or can visit them in person at a local branch. You might need to produce a variety of information before your lenders, regarding your current financial status and the home you would like to refinance. If you have a lien-hold or second mortgage on the home, additional documentation list will extend further.
Last but not the least; you must take some time and effort to choose the right option for you. Carefully consider the options given by the mortgage lender, such as fixed-rate adjustable, cash-out refinancing and other options. Choose the one, which suits your finances the most.