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Katie Agner

Three things to do before refinancing

Wednesday, October 25, 2017 - Article by: Katie Agner - Prospect Financial Group, Inc. - Message

Looking to lower your current payment or shorten your term? Refinancing can help homeowners in more than one way. To be fully prepared, read below three things to do before starting the process of refinancing your property.

1. Clean up your credit

You are going to want to prove that you are credit-worthy before applying to refinance. In recent years, lenders have gotten more demanding with higher credit standards. Try Experian, Transunion, or any other credit bureau for a credit check. Federal law requires that each credit bureau provide one free copy of your credit report each year. If you check more than once from a bureau in a year, there is a fee of $10 per copy. Still, you will want to make sure that your credit is a good as possible before applying. The higher the credit score, the lower the interest rates. A credit score above 720 is recommended to qualify for the lowest possible rates. Even if your credit score is lower, you can still get approved; however, your rates and fees may be higher.

2. Do the math

Is refinancing really the best option for you? Weigh the potential savings with the costs it will take to get those savings. According to Forbes.com, a good rule of thumb is to refinance when the new rate is one percentage point below the existing rate. In addition, don't forget to check your home's current value as well. Get an appraisal to make sure that your home's value has not depreciated. If it has, the refinance appraisal will be the basis for the new loan.

3. Shop around

Shop around for mortgage rates as much as you can. These are ever-changing and sometimes change more than once a day. By keeping a close eye on where rates are, you will be able to get a better understanding of the mortgage industry in general. The more you know, the more money you could save. Be sure to look around at different brokers, as well. Finding one that is a great fit can help you out in the long-run. Good communication is something to look for.

Once you decide it is time to refinance, ask as many questions that come to mind. It is nice to know why and when rates change, because the more money you are able to save, the better!

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