How to Refinance House Rates

Refinancing a home loan can save money.

Mortgage refinancing lowers loan rates, which can reduce the overall interest paid on a loan. A lower-rate home loan can also build credit and reduce monthly payments. Several mortgage-refinancing programs exist, and each one has specific procedures and standards unique to the loan. Not everyone can benefit or be approved for refinanced house rates, so it is important to be aware of what is needed for a successful mortgage loan refinance application.

Things You'll Need

• Bank statements
• Completed application
• Credit report
• Property appraisal
• Pay stubs

Instructions

1. Organize and make copies of financial records so they can be presented to a loan officer. The loan officer will use these documents to determine eligibility for the loan refinancing.

2. 

   Several types of mortgage refinancing options exist.

   Assess costs and rates of refinancing programs such as Federal Housing Administration (FHA) loans, Home Owners Preserving Equity (HOPE) loans, and private mortgage refinancing. Mortgage rates can vary between financial institutions and depend on credit rating and personal financial details, such as payment history, net worth, and debt-to-equity ratio.

3. 

   A home's equity value could be the key to a lower interest rate.

   Appraise the home's value and equity using a professional appraiser. This will help determine which refinancing loans to apply for. There is little benefit to applying for a loan you do not qualify for, so be sure to check the loan refinancing conditions. The mortgage lender may also require home inspection reports.

4. Obtain the necessary documents, educational instructions and financial requirements needed for the loan application process. Separate visits to a loan officer and other lending officials may be required.

5. Follow up with the loan officer and lender on a periodic basis to make sure they have everything needed for the application and to verify the loan is being processed. A prequalification, new interest rate and draft loan contract should be granted once the application is approved.

6. 

   The refinancing contract outlines all the details of the new loan.

   Review the final loan contract for the proper interest rate, amortization schedule and loan terms. Sometimes specific terms may be placed on the new loan agreement that could disallow prepayment without penalty.

Tips & Warnings

• Building a financial profile before applying for home mortgage refinance can be accomplished by reorganizing your budget, paying off debt at least 30 days before applying and increasing savings.

• Checking a credit report for errors can avoid potential problems or disqualification after applying for the home rate refinance.

• Weighing the costs and benefits of the refinance determines if the refinance is worthwhile.

• The presence of an adviser or attorney may be helpful when reviewing the new contract to be signed at closing.

• Be sure to investigate several mortgage refinancing options.

• Be careful not to confuse refinance pre-approval with pre-qualification.

• Some government-sponsored loans don't allow the home to be rented.

• Beware of add-on fees and refinancing costs--they're not used in every refinancing program.

References

• The Federal Reserve Board: A Consumer's Guide to Mortgage Refinancing
• FHA Loan Program: New FHA Refinance Program
• Financial Stability Plan: Learn About Making Home Affordable
• USA Today: Not everyone can refinance to cut mortgage payments
• Department of Housing and Urban Development: Streamline Your FHA Mortgage

Resources

• Federal Trade Commission: Mortgage Discrimination
• Department of Housing and Urban Development: Avoid Foreclosure
• FHA Loan Experts: FHA Refinance
• Fannie Mae: Home Affordable Refinance FAQS
• U.S. News & World Report: The New and Almost Free, Way to Refinance