How to Refinance Mortgages

Homeowners have different reasons for refinance their mortgages. There are some basic guidelines to ensure you will get the best mortgage rate and services during the process.

Difficulty: Moderate

Instructions

Things You'll Need:

• Need to refinance
• Ask people you trust for referral
• Do some research before you select a lender
• Documents needed

1. 

   When refinancing your mortgage, we need to focus on one thing: best possible rate with least cost involved. Most lenders and brokers charge you an origination fee which translates in points. 1 point is 1% of your loan amount; 0.5 point is 0.5% and so on and so forth. The more points your pay, the lower your rate should be and vice versa.

2. 

   Go to http://www.mortgage101.com/ and check rates and programs in your state. You can enter loan amount and decide how much point you want to pay, and how many years you want your mortgage to be amortized over. Play around and get some ideas first.

3. 

   Ask around and get people you trust to refer you to someone they refinanced their mortgages with. If they are happy with the process and the result, you will be in good hand.

4. 

   You can also go to your banker and check with them to see if they have a better rate and terms. Go to a mortgage broker. Brokers usually have access to multiple sources and they can pick the best one for you. Lot of times, brokers also have access to your personal bank. You just have to compare first.

5. 

   Most people will tell you need to submit everything before they can quote you a rate. Just tell them as truthful as you can about your situation. Avoid giving your info everywhere before you decide who to refinance with. You do not want to have your credit checked multiple times. It will lower your credit scores. Higher credit scores will get you better rates.

6. 

   Another thing to watch out for is the estimated closing cost, called truth in lending, or good faith estimate before you decide where to go. The estimate consists of all the cost involved in the transaction including origination fees.

7. 

   Good rule of thumb: try not to pay too much in points in an attempt to lower your rates. If you do the calculation, you will find out that it usually takes many years to recover your upfront cost. No one can predict if you are going to be in the house a few years later. Rates might be lower later on and you might refinance again. Then you would have lost the money you paid.

8. 

   Gather all your necessary documentations as follows: last two year tax returns and w-2', last two month bank statements, most recent month paystubs,recent mortgage statement and a copy of your current homeowner' s insurance.

9. 

   The rest should be easy. When the loan document is ready, you can either make an appointment to sign at the escrow company, or ask to have it sent to your house with a notary. You pay the same fees either way. Why not make it easy on yourself.

10. Here are some rights you have as a borrower. You will have a 3 day rescission time by law after your signing of the loan document. Basically, you can cancel the deal if you have to for any reason. You may have to pay for the appraisal report and credit report fees. You are entitled to have a copy of your credit report and appraisal report regardless if you complete your transaction or not.

Resources

• Why do people refinance their mortgage?
• How to calculate closing cost

[jenng]

on 6/11/2009 gREAT ARTICLE ON HOW TO REFINANCE MORTGAGES 5*

[maryellen1001]

on 1/7/2009 Good to know!