Interest rates are still at historic lows, and lenders are beginning to loosen up (albeit slightly) when it comes to lending. So what should a homeowner do to ensure that they get the best deal when they refinance their mortgage?
Preparation
There are a few things that a homeowner needs to do before making the leap to refinance their mortgage.
Review your credit report for any errors. I discussed how credit reports play into getting a mortgage in this recent article Credit Scores and the Best Mortgage.
Determine your motivation for refinancing. Do you want to lower the number of years on your mortgage? Do you want to save a certain amount each month?
Come up with a realistic estimate of your property value. Remember that your property value is based on similar homes that have sold in your area over the last 6-12 months.
Get your paperwork in order. Generally a homeowner will have to provide the last 30 days of paystubs, last 2 years W-2s, last 2 years Federal Tax Returns and last 2 months bank statements.
Shop Around
Interest rates, closing costs, application fees, and time frame will vary from lender to lender. It is never a good idea to put all your eggs in one basket. Make sure that you speak to at least 2-3 lenders to judge if you are getting a good deal and that the loan officer meets your expectations.
Decision Time
When it comes time to make a decision to move forward, be ready to act quickly. Lenders have slowed down considerably, which means it could take 45 or more days to close your refinance. You will need to get the necessary documents to the loan officer as quickly as possible to avoid any potential issues with the rate expiring. Remember, lenders underwrite in a first come first serve order. The quicker your file gets submitted, the quicker you receive a loan approval. Take into consideration the expected closing date. You don’t want your refinance to come down to the wire and realize that you will be on vacation that week. Also, don’t focus all of your energy on the interest rate. 4.00% with $8,000 in fees certainly doesn’t sound better than 4.125% with $2,000 in fees, does it?
Communication
Once the underwriter has completed the initial review of your file, they will most certainly request some additional documentation. Be prepared. They may request an updated bank statement, explanation on a recent “large” deposit, a more recent paystub, etc, etc. Be ready to get these other items to your loan officer quickly. Remember, the underwriter reviews files on a first come first serve basis.
These steps should put you in a good place to take advantage of the current interest rates. If you’d like to get a Rate Quote now head on over to my Rate Quote Request page.
