Whether you are hoping to lower your interest rate or you just need access to some of the equity in your home for other projects, a refinance of your current mortgage could be the answer. Before refinancing, though, use the following four tips to prepare for the process.
1. Check Your Credit
Before calling up lenders, get a copy of your credit report from each of the three major reporting agencies. Start by finding any errors on the report and contesting them, then take the time to make sure there are no outstanding debts that you can pay off. It can take up to 30 days for changes to show on your report, so it's important to take care of this task in advance of your refinance application. Just like when you first purchased your home, you will get a better financing deal if you have high credit scores with minimal outstanding debt.
2. Get An Accurate Equity Statement
If you are refinancing in order to cash out some of your equity, then you need to have an accurate number for the amount of equity in your home. Your current mortgage lender can provide you with the most up to date equity statement. Keep in mind that you will not be able to cash out the full amount of equity when you refinance, so you will also need to shop refinancing lenders to determine which ones provide cash-out percentages in the amount that meets your needs.
3. Determine Your Closing Costs
Closing costs can vary depending on who refinances your mortgage. Just like when you first got your mortgage, there will be fees involved. These typically include inspection and appraisal costs, attorney closing fees, application fees, and the title search fee. The lender should be able to provide the amount of closing up front before you decide to sign with them for your refinancing. No-cost closings are also provided by some lenders, but keep in mind that you will still pay the costs in some way. Generally, a no-cost closing results in either a higher interest rate or the fees are rolled into the refinancing loan.
4. Schedule The Appraisal
A private appraisal allows you to get an accurate gauge of the value of your home. Taking care of any problems in the home, improving the exterior curb appeal, and highlighting any upgrades you have made to the home since the initial purchase can help raise the appraisal value. Of course, other factors, such as the value of homes in your neighborhood, will also affect the final appraised value.
Contact a refinancing service like Liberty Escrow Inc. for more help.