If you're thinking about refinancing your mortgage, you're not alone. Since mortgage rates have been sitting at near-record lows all year long, homeowners can't resist trying to get a better deal. That's why refinancing applications have gone through the roof in 2012.
However, filling out an application doesn't mean you'll automatically get to take advantage of lower rates. If you want to maximize your chances of saving money, follow these 6 tips:
1. Make sure your house is in tip-top shape
Before the housing bubble burst, lenders were handing out money without asking any questions. Today, they're being a whole lot more careful about whom they loan money to. So, don't be surprised if a lender sends an appraiser or an inspector to check out your home before signing on the dotted line.
2. Learn what LTV is and how it affects you
Short for "Loan-to-Value", LTV is a ratio that compares the amount of your loan to your home's appraised value. As a result, the higher your property value is, the better (which is why it's so important to follow tip #1!).
If your LTV ratio is 90%, you can qualify for even lower rates. If you can get a LTV ratio of 80%, you won't have to pay Private Mortgage Insurance.
3. Double-check your credit report
Your credit score has always been a vital part of qualifying for a mortgage, but it's even more important in 2012. Thanks to stricter guidelines from Fannie Mae and Freddie Mac, your credit score can mean the difference between getting a rate you can afford, or being stuck with a rate that causes a serious financial struggle. So, the last thing you want is a mistake on your credit report to cost you hundreds of extra dollars every month!
Don't think mistakes can happen?
Think again!
A recent study from Consumer Reports said that 70% of credit reports have some kind of mistake in them.
4. Shop around
You wouldn't buy a new pair of running shoes without doing some comparison shopping first, so why would you do something as important as refinancing your mortgage without doing some homework?!
Most people simply fill out an application with their existing lender, but you may be able to get a better deal elsewhere -- especially now that mortgage rates are lower than they've been in years. Thanks to those low rates, lenders are looking for ways to get more quality customers in the door.
5. Don't let your current lender talk you out of it
Some lenders don't want to lose your business -- or, they don't want to let go of those higher rates you're paying. As a result, they'll tell you that you've already got a great mortgage rate, so why bother to refinance it?
No matter what they say, the numbers don't lie. Mortgage rates are much lower now than when you originally signed on the dotted line -- even if your mortgage isn't all that old.
At the end of July 2012, the average 30-year mortgage rate was 3.62%. A year before that, the average rate was 4.68%. At the end of July 2009, the average rate was 5.70%. Those are huge differences that can save you thousands of dollars each year!
6. Don't forget about fees
Every home loan comes with closing costs, and refinancing your mortgage is no exception. Some lenders are advertising "no fee" offers in order to get more customers -- meaning that they'll pay the costs for you. However, that doesn't always save you money. You'll actually wind up paying higher rates under a "no fee" option in order to make up the difference. After all, lenders have got to turn a profit somehow!
However, filling out an application doesn't mean you'll automatically get to take advantage of lower rates. If you want to maximize your chances of saving money, follow these 6 tips:
1. Make sure your house is in tip-top shape
Before the housing bubble burst, lenders were handing out money without asking any questions. Today, they're being a whole lot more careful about whom they loan money to. So, don't be surprised if a lender sends an appraiser or an inspector to check out your home before signing on the dotted line.
2. Learn what LTV is and how it affects you
Short for "Loan-to-Value", LTV is a ratio that compares the amount of your loan to your home's appraised value. As a result, the higher your property value is, the better (which is why it's so important to follow tip #1!).
If your LTV ratio is 90%, you can qualify for even lower rates. If you can get a LTV ratio of 80%, you won't have to pay Private Mortgage Insurance.
3. Double-check your credit report
Your credit score has always been a vital part of qualifying for a mortgage, but it's even more important in 2012. Thanks to stricter guidelines from Fannie Mae and Freddie Mac, your credit score can mean the difference between getting a rate you can afford, or being stuck with a rate that causes a serious financial struggle. So, the last thing you want is a mistake on your credit report to cost you hundreds of extra dollars every month!
Don't think mistakes can happen?
Think again!
A recent study from Consumer Reports said that 70% of credit reports have some kind of mistake in them.
4. Shop around
You wouldn't buy a new pair of running shoes without doing some comparison shopping first, so why would you do something as important as refinancing your mortgage without doing some homework?!
Most people simply fill out an application with their existing lender, but you may be able to get a better deal elsewhere -- especially now that mortgage rates are lower than they've been in years. Thanks to those low rates, lenders are looking for ways to get more quality customers in the door.
5. Don't let your current lender talk you out of it
Some lenders don't want to lose your business -- or, they don't want to let go of those higher rates you're paying. As a result, they'll tell you that you've already got a great mortgage rate, so why bother to refinance it?
No matter what they say, the numbers don't lie. Mortgage rates are much lower now than when you originally signed on the dotted line -- even if your mortgage isn't all that old.
At the end of July 2012, the average 30-year mortgage rate was 3.62%. A year before that, the average rate was 4.68%. At the end of July 2009, the average rate was 5.70%. Those are huge differences that can save you thousands of dollars each year!
6. Don't forget about fees
Every home loan comes with closing costs, and refinancing your mortgage is no exception. Some lenders are advertising "no fee" offers in order to get more customers -- meaning that they'll pay the costs for you. However, that doesn't always save you money. You'll actually wind up paying higher rates under a "no fee" option in order to make up the difference. After all, lenders have got to turn a profit somehow!
Source...