Thinking of refinancing your home? Please read through our refinance guide for some helpful insight and tips before submitting your application.
If you’re considering a refinance home loan, there’s an upside and a downside nowadays. The upside is that the rates are really good. The downside is that with the new regulations that came into effect in January of 2014, lenders are under increasing pressure to make sure that borrowers who bear home refinance loan payment are going to be able to repay their loans. So, with that in mind, consider the following tips before you approach a lender for a refinance home loan.
Get Your Paperwork In Order
When you’re looking for a home refinance or for that matter, a first mortgage, your lender will ask for your bank statements, records of your investment accounts, W-2s and returns. You may be inquired so as to explain where the money came from. What your lender is trying to do is determine your ability to make your payments. A Christmas gift of money from Mom and Dad, although it looks good on your record of deposits, isn’t proof of steady income and won’t fetch you a quick refinance home loan.
The competition is expected to be fierce for home refinance business, so use that power to your advantage. Shop around, find the best home refinance rates, and remember that the lowest interest rate doesn’t necessarily mean the best deal.
Consider The Closing Costs
If you missed the boat on your last chance to your home refinance, when the rates went up in 2013, you might still be able to get on board with best home refinance rates. But think about the closing costs, and consider whether it still makes sense. It might take a while for you to break even, but if your rate is high right now, it might still be a good idea to search for a refinance home loan. If you’re in doubt as to whether it will benefit you to refinance home, talk to your lender. You can also use one of the many mortgage calculators available on our website to determine if you should refinance option or not. Please know that good home refinance rates can be found through licensed agents and companies.
Know Your Rights
The new mortgage rules accord many new rights to borrowers for home refinance. You can get details at the CFPB (Consumer Financial Protection Bureau) website as far as home refinance loans are concerned. It’s important to be aware of your rights when it comes time to refinance, especially if you’ve had issues with your lender or if you’ve fallen behind on your payments.
Protect Your Credit
Without decent credit, you’re going to be dead in the water. Even if you’re saying to yourself, “It’s all good, I’ve never missed a payment on anything,”” you should still check your credit score before you see your lender and ask for home refinance rates and loan. Mistakes can be made, but if that happens, they can be corrected.
Don’t Ask For More Than You Can Afford
A responsible lender won’t let you borrow more than you can handle. So it’s better to have a good read on current home refinance rates and then contact the lender. If it looks like you’re going to be up against the wall at the end of the month once all your other obligations, like student loans or credit cards, are considered, you may not qualify for a refinance home option. The conventional wisdom suggests that anywhere between 33% and 36% is an acceptable debt-to-income (DTI) ratio. Some lenders may permit a higher DTI, but don’t count on it.
Think About How Long You Plan To Keep Your House
If you intend to keep your house for ten years or less, you might consider refinancing under an ARM (adjustable-rate mortgage) refinance home loan. The rates can be as much as a full percentage point lower than they are on fixed-rate loans over 30 years. However, if you’re unsure how long you’ll be in the home, you might be better off with a fixed-rate loan.
Don’t Sweat The Forecast
You’ve no doubt heard that mortgage rates are expected to go up in the near future. However, keep in mind that they’re not expected to jump a whole lot between now and the middle of 2015, so if you’re debating whether or not you should refinance your home, don’t feel as though you have to make the choice this minute. Buying your home in the first place was a big decision, and it wasn’t one that you made lightly. Approach your home refinance loan lender the same way – there’s no need to panic and do something you’re not ready for.