How to Refinance a Mortgage

There are many reasons that homeowners choose to refinance their home. Some of the most common reason are to get a better interest rate, lower the monthly payment, get a different type of mortgage, or draw out some built-up equity. Here is a step-by-step guide of things to consider in the process of refinancing your mortgage.

Difficulty: Easy

Instructions

Things You'll Need:

• Your financial information (including W2s, bank statements, investment account statements, and 2 months of pay stubs)
• Your current mortgage information to provide to your new prospective lender.

1. Assemble your financial information so you have a clear picture of your finances to provide to the lender you would like to refinance your mortgage. Be sure to gather the information on your current mortgage, which is easily done with a copy of your most recent mortgage statement.

2. Have a clear understanding of your current credit score for your new lender so you know the types of mortgage products you qualify for. These are easily obtained for a small fee from one of the three major credit bureaus: Transunion, Experian, and Equifax.

3. Interview prospective lenders to refinance your mortgage. You should be comfortable with your lender and they should act as a consultant. A good mortgage broker will assist you in choosing the right mortgage product to meet your needs.

4. Once you've chosen a lender, they will need to pull your credit report and order an appraisal of your home. They will also verify your financial and employment information and make sure your property taxes are current.

5. Be sure to speak with you lender about all of the fees you will incur through refinancing. Quite often, these fees will be very much the same as you paid on your original mortgage in closing costs, such as origination fees, title search fees, and appraisal fees.

6. Once the lender has verified all of the information they require to approve your loan, you will go through the closing process again. The closing process will pay-off your existing mortgage and generate a new one through the refinance process.

7. Congratulations! You've refinanced your mortgage!

Tips & Warnings

• Never allow a lender to pull your credit report before you've decided which lender you will use.
• It helps to know what homes similar to yours have sold for recently. A quick phone call to the Realtor who sold you your home can answer this question for you.
• Before refinancing, have a clear picture of how many years you plan on living in your current home. This information will help your lender in recommending the best mortgage products for your refinance.
• As a general rule, lenders prefer you to have 20% equity in your home in order to refinance. Lenders do vary, but banks are hesitant to lend over 80% of a home's or property's market value due to risk of default.
• Always feel free to ask you lender for a clear explanation of all of the fees your will incur through the refinance process. You may find it is more cost-effective to stay in your current mortgage!

[DiscountTickets]

on 3/15/2008 Great Article, thanks for the information.

[bake4u]

on 3/15/2008 i've spoke to my son about refinancing his home beings rates have lowered and your article will be most helpful for me so he can see it's not as bad as he thinks thanks alot, very informative

[writetruth]

on 3/15/2008 Great Info~~