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3 Steps To A Successful Home Mortgage Refinance

05/21/2010

A home mortgage refinance can be a helpful step toward greater financial independence and security, but there are numerous potential pitfalls in the process. You can avoid many of these by taking the following steps to prepare yourself.

3. Trust your lender.

Unless you have personal experience in loan origination, you'll need advice and counsel from someone who understands the field. Your lender will fill this role for you, and as a result, it's hugely important that you work with someone you can trust. Be cautious and do your homework when selecting a lender. Get referrals. Research lenders through Lender411.com and similar sites and find the lowest mortgage rates available. Find a lender who is honest and who will try to get the best financial package for you, and avoid a lender who may set you up to fail with heavy fees or hidden costs. A mortgage refinance is the beginning of a long-term relationship with a loan originator, and you want to ensure that this relationship starts healthy and stays that way.

2. Prepare financially.

If you aren't sure you'll be able to make your new mortgage payments, don't move forward with a refinance. This may seem obvious. It's not. Numerous homeowners have gotten loans entirely on wishful thinking and high hopes only to wind up in deeper financial trouble than ever before due to insufficient funds or unemployment. Is your job stable? Have you saved enough income to meet a few monthly payments should an unexpected financial crisis arise? If not and you become late on payments you could lose your home and suffer bad credit for years. If so, you're likely ready to pursue a refinance. If not, take the time to prepare financially before you contact your lender.

Prepare yourself. A mortgage refinance is a long-term arrangement. To avoid pitfalls, ensure that your other life arrangements are long-term as well. Is there a risk that your job may transfer to another area and require you to move with it? Are you starting a family that may soon require a larger living space? Are you or your spouse considering divorce, separation, or relocation? These and other factors may affect your ability to repay your loan. Some refinance packages include early repayment penalties that may put you at a disadvantage should you need to sell your home immediately. Plan long-term. Dramatic life events such as these are often unexpected, but be aware of warning signs and act accordingly.

1. Go for it!

Trust your lender, prepare financially, and prepare yourself. Are you working with a stable financial institution, represented by a lender who has your best interests in mind? Do you have secure work and a safety net of accessible savings? Are you and your spouse or family prepared to enter a long-term debt arrangement? Chances are, you've already dealt with steps two and three or you wouldn't be planning to refinance. Step one will likely be the difficult part. If you're stuck, start by researching lenders and loan providers through local brokers and resources like Lender411.com. There are plenty of experts in the field who will offer advice and assess your needs in order to craft the best refinance package for you. Go for it!

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