Despite the gloom and doom on the news it's still a great time to refinance your home mortgage. Rates are very low, lenders are looking for new business and if you know what you're doing you can save on your refinance and over the course of the new loan. We've identified a check list of Do's and Don'ts that will hopefully help relieve the stress of the process and save you time and money as you search, find and secure the best refinance loan available.
DO know your Target Refinance Interest Rate - The target rate you need to refinance at is the one that saves you the most money at the lowest interest rate. How do know what that is? All you have to do is use this little formula so get out your calculator and first think about how many more years do you plan on having your mortgage. Write that number of years down. Then divide the refinancing closing costs by the amount of annual savings you'll receive by refinancing. Now compare this number with the first one you wrote down. The refinance is a good deal if you'll still be in the home after the break even year has past.
DON'T Choose the Wrong Lender - Make sure you are familiar and comfortable with your lender. Getting the best rate will be worthless if the lender makes mistakes through inexperience or worse. Unfortunately many mortgage bankers today are little more than salespersons with little if any, underwriting experience. Do your research and make sure your lender has a good reputation and is competent.
DO Complete the loan application - I won't matter how low a rate you find if at the closing table you cannot close your loan. The latest underwriting rules make this the new most important step of the loan process. Many mortgage lenders still use a short credit pre-qualification method which can come back to bite you at closing. To be sure you are qualified you should complete a full loan application and give all your documentation to your loan officer for a complete review of your credit, income, and assets. In doing so, you'll save yourself time and any unpleasant surprises.
DON'T get Greedy on the Interest Rate - One of the biggest mistakes homeowners make when refinancing is costing themselves money by waiting for a lower rate only to see the rates rise unexpectedly. Take advantage of market volatility and lock your loan. If you know your target rate lock in as soon as that rate is available. That target rate could only last for a few hours and then head back up again. When rates are nearing your target, contact your lender so you are both watching and waiting to lock.
DO Continue To Monitor Rates - Even after you lock-in your refinance loan you should keep an eye on rates in case they go lower. Lenders have different re-lock rules so if the rates fall you can probably still get a lower interest rate. Just know what to expect and keep watching those rates until you close on your loan.
DO know your Target Refinance Interest Rate - The target rate you need to refinance at is the one that saves you the most money at the lowest interest rate. How do know what that is? All you have to do is use this little formula so get out your calculator and first think about how many more years do you plan on having your mortgage. Write that number of years down. Then divide the refinancing closing costs by the amount of annual savings you'll receive by refinancing. Now compare this number with the first one you wrote down. The refinance is a good deal if you'll still be in the home after the break even year has past.
DON'T Choose the Wrong Lender - Make sure you are familiar and comfortable with your lender. Getting the best rate will be worthless if the lender makes mistakes through inexperience or worse. Unfortunately many mortgage bankers today are little more than salespersons with little if any, underwriting experience. Do your research and make sure your lender has a good reputation and is competent.
DO Complete the loan application - I won't matter how low a rate you find if at the closing table you cannot close your loan. The latest underwriting rules make this the new most important step of the loan process. Many mortgage lenders still use a short credit pre-qualification method which can come back to bite you at closing. To be sure you are qualified you should complete a full loan application and give all your documentation to your loan officer for a complete review of your credit, income, and assets. In doing so, you'll save yourself time and any unpleasant surprises.
DON'T get Greedy on the Interest Rate - One of the biggest mistakes homeowners make when refinancing is costing themselves money by waiting for a lower rate only to see the rates rise unexpectedly. Take advantage of market volatility and lock your loan. If you know your target rate lock in as soon as that rate is available. That target rate could only last for a few hours and then head back up again. When rates are nearing your target, contact your lender so you are both watching and waiting to lock.
DO Continue To Monitor Rates - Even after you lock-in your refinance loan you should keep an eye on rates in case they go lower. Lenders have different re-lock rules so if the rates fall you can probably still get a lower interest rate. Just know what to expect and keep watching those rates until you close on your loan.
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