How to Refinance Your Home With a Low Fixed Rate
Thousands of homeowners refinance their homes every week in a bid to secure a better interest rate or receive other favorable terms, including reducing the length of their mortgages. Some homeowners want to avoid the interest-rate uncertainty of a variable rate home loan by refinancing to a fixed rate. With 15- and 30-year fixed rate mortgages at some of their lowest rates in history, now is a good time to consider refinancing your home loan.
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Instructions
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Instructions
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Check your credit reports. Make sure your own financial affairs are in order. Obtain copies of your credit reports and your credit score and look for any mistakes. A mistake on your credit reports can lower your credit score, making it difficult to get home refinancing, especially at a favorable interest rate. Experian, one of three credit bureaus, says a credit score of 700 or more reflects good credit management.
You can find copies of your credit reports at AnnualCreditReport.com for free, paying a small fee to obtain your credit scores separately. Examine all three of your credit reports to make sure that your personal and work information is correct, and that information about your loan balances, credit lines, and payments is accurate. If there are mistakes, follow the credit bureau's instructions on how to correct them. Within 30 days the corrections should be made; obtain corrected copies of credit report and then begin to search for a new mortgage.
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Gather the information you'll need for lenders: W2 earnings statements or 1099 DIV income statements for the last two years; recent pay stubs; federal tax returns for the past two years; bank statements for the past few months; proof of other income, such as tips, Social Security payments, etc.; investment income proof; and other documentation as required. Assembling this information ahead of time can reduce stress while allowing you to focus on what is important--finding the best home refinancing interest rate.
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Research home refinancing. If your credit is good, you have many refinancing options. The easiest option is to explain to your current home loan provider that you want to refinance at a low fixed rate. Your lender already knows you and may want to keep your business. And you may not need to gather as much paperwork. In some cases your lender may absorb some, if not all, of your closing costs, potentially saving you thousands of dollars.
But also explore your options with other commercial and community banks and credit unions. Also use an online loan search site such as lendingtree.com to find lenders. Although your current lender may offer you a good deal, you might find a better one elsewhere.
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Close on your home loan. Once you have found a new mortgage that is right for you, lock in the interest rate and complete your application. This process should go fairly quickly, because you've already gathered your important documentation.
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Tips & Warnings
You may be able to lower your closing costs by asking your lender to absorb or reduce the cost of some of these expenses.
Beware of refinancing scams that target distressed homeowners. Have an attorney examine your paperwork to preserve your interests.
