How to Refinance a Conventional Mortgage

Refinancing can allow you to obtain a lower interest rate.

A conventional mortgage loan conforms to guidelines established by Fannie Mae. Refinancing may save you money by lowering your monthly mortgage payments. It also could allow you to use the equity in your home to consolidate debt, obtain cash, pay tuition or take a vacation. However, you must consider the expenses associated with refinancing.

Instructions

1. Determine your refinancing goals. Refinancing with a 30-year fixed rate loan could eliminate an adjustable rate mortgage. Choosing a shorter term, such as a 15-year loan, can shed years of mortgage payments. Paying off your current loan and consolidating debt may reduce your monthly outlay of cash. Your goal may be to simply lower your current interest rate and monthly payment with a rate and term refinance. If your goals include debt consolidation, home improvements or cash from equity, inquire about a cash-out refinance.

2. Contact your current mortgage lender to discuss refinancing options. Retaining customers is easier and more cost effective for the lender than acquiring new customers. Usually you can complete refinance transactions faster with your current lender, because your mortgage history does not need to be verified by a third party, and your property details, title records and employment information already are on file.

3. Compare interest rates and closing costs of mortgage lenders. Shop online at websites such as E-loan or Lending Tree, which represent lenders that compete for your business. Request free rate quotes, a good faith estimate and a Truth-In-Lending disclosure. A Truth-In-Lending disclosure documents the annual percentage rate (APR) of the loan. Compare companies' APRs and administrative fees to determine the best deal.

4. Apply for a loan to refinance your conventional mortgage. Complete your mortgage loan application and disclose any required information. Promptly submit these items to avoid delays. Ask your loan officer to explain items that need clarification.

5. Provide any required documents. Supply pay stubs and tax information as well as information about your assets and debts. An underwriter reviews these documents to determine whether you qualify for a new loan.

6. Meet with a settlement officer to sign your loan documents. Once your loan is cleared to close, review, sign and date your loan documents. Your existing conventional mortgage will be shown on the HUD-1 Settlement Form, which indicates the balance being paid off.

Tips & Warnings

• Pay off outstanding debts and try to eliminate damaging information on your credit report before contacting a mortgage lender.

References

• The Federal Reserve Board: Consumers Guide To Refinancing

Resources

• Lending Tree: Refinance
• E-loan: Home Refinance