If you are seeking to reduce your monthly mortgage payments, or wish to obtain a more favorable interest rate or loan term, then you may have considered refinancing your home. Although this process may initially appear complex, you can successfully refinance your mortgage by seeking qualified help and by conducting thorough research.
Steps To Refinancing
There are several precautions you should take before beginning a home refinance, especially during a period of great economic uncertainty such as this. However, here are five key steps that will help ensure this process is carried out as smoothly as possible.
Check Your Credit Score
A strong FICO® credit score can bring you many great perks. First and foremost, you will likely be offered a low interest rate because your lender will consider you a low-risk borrower. According to personal finance website Bankrate, the benchmark interest rate for a 30-year fixed-rate mortgage on August 11, 2020 was 3.060%. Most lending institutions and credit reporting agencies consider a credit score of 670 or higher to be “good” and a score of 800 or higher to be “exceptional.” You can generally check this score for free.
Determine Your Target Interest Rate
Interest rates for mortgages fluctuate daily and even several times per day. These changes can be especially big during a recession. Therefore, it’s imperative to remain informed about existing market trends. This includes tracking how closing costs vary. Be sure to select a target interest rate that would yield interest savings that are at least equal to your closing costs. If you intend to live in your home longer than you initially planned to, you could potentially end up saving a significant amount of money.
Find A Qualified Lender
As with any process involving money, it’s important to shop around and weigh all of your options. Don’t just settle for the first lender that offers you an enticing deal. After all, the criteria for establishing interest rates often varies by lender. Thus, you should request quotes from at least three or four different lending institutions before making your final decision. You should also know that doing this won’t negatively affect your credit score, as long as you submit all of these applications within a few days of each other (be sure to ask all lenders for more specific information about this stipulation, if necessary).
Stay On Guard For High Lending Fees
Each lender typically requires borrowers pursuing a mortgage refinance to pay a certain amount in loan fees. Take note of these for every lender you approach, and pay particular attention to the ones that require high fees. Examples of fees frequently associated with a mortgage refinance include escrow and title fees, appraisal fees, property taxes, and origination fees. Certain lenders may also add interest rate discount fees (also known as points). Lending institutions generally offer a loan disclosure and an estimate of total closing costs, which can help you compare all of your options more carefully before making your final decision.
As the old adage goes: “Good things come to those who wait.” The mortgage refinancing process is no different. Take as much time as you need to fully understand the terms of your new loan deal and to ask any questions you may have. Additionally, you should remember that many lenders will often let you “lock in” your interest rate for at least 30 days.
Work With The Refinancing Professionals
Speak with the experts at Mathis Title Company in Fairfax, Virginia for more information on the mortgage refinancing process. We provide both real estate settlement services and legal advice to buyers, sellers, and lenders. Robin Mathis is an attorney with more than 35 years of experience and who was sworn into the United States Supreme Court. She has extensive knowledge of the buyer and seller sides of real estate transactions.
At Mathis Title Company, we know that interest rates change constantly and that the economy can suffer major, unexpected losses from one day to the next. Whether you are looking to switch to a fixed-rate mortgage, wish to lower your monthly payments or interest rate, or get rid of private mortgage insurance (PMI), we will always be here to listen to your needs and concerns. Another notable benefit of refinancing is that you can consolidate your home equity line of credit (HELOC) and first mortgage into a single payment. You may even potentially be able to do a cash-out refinance if your home’s value has gradually increased over time.