How to Refinance a Conventional Loan

Interest rates have come down considerably since you bought your home. A refinance seems the ideal way to both cut expenses and get some cash to redo the bathroom or put in a pool. You receive offer after refinance offer in the mail and on the phone; they all say you can, but none tell you how to refinance your conventional loan.

Difficulty: Moderately Easy

Instructions

1. Ensure it makes sense to refinance. Your credit score must be above 620 to qualify for a conventional refinance loan and above 720 to get the best available rates. You must also have at least 10 percent equity in your property. Determine the break-even point. Todd Huettner of Huettner Capitol says, "Don't pay too much money upfront for a long-term break even. Two years is ideal."

2. Order an appraisal. Per the Home Valuation Conduct Code instituted to protect consumers in 2009, loan processors and mortgage brokers are no longer able to provide this service to their clients.

3. Shop for a mortgage broker or banker. Call top real-estate agents in your area for recommendations; the best often work with the best. Ask brokers and bankers for references; specifically ask to talk to others who have obtained a refinance of their conventional loan through the prospective firm. Establish the broker's level of education, experience and expertise and the flexibility of the lenders they work with.

4. Decide on a banker and apply for your conventional refinance loan.

Tips & Warnings

• "Never call ads or reply to direct mail and never call your current loan holder," says Jeremy Forcier, mortgage broker. "You will most always get somebody in a cubicle whose job is to answer phones; they know nothing of real estate." Be careful about paying off collections advises Huettner. It can hurt your credit rating. When you pay it off and the records are updated what was a 5 year old collection appears as brand new.

References

• Todd Huettner, President, Huettner Capitol
• Jeremy Forcier, Branch Manager, Benchmark Mortgage

Resources

• Home Valuation Code of Conduct