How to Refinance a Mortgage

When refinancing a mortgage, avoiding high fees is just as important as qualifying for a low interest rate. Many homeowners overlook fees when refinancing and sign for the first mortgage they qualify; these homeowners overpay for the financing of their new mortgages. Here are several tips to help you avoid paying too much when you refinance your mortgage loan.

Mortgage fees can add up to thousands of dollars, money that comes out of your pocket. Before you sign for a new mortgage you can ensure you get the best deal by carefully comparing loan offers.

Ask About Lender Fees and Closing Costs

When you comparison shop for a new mortgage it is important to compare all aspects of the loans, not just the interest rates. Ask your lender for the Good Faith Estimate of fees. Mortgage lenders are required to provide you this document upon receipt of your application; however, many will provide it to you upon request.

Use the Good Faith Estimate to compare all fees for the loans you are considering; do not rely solely on the Annual Percentage Rate (APR) as this will not have all of the fees found on the Good Faith Estimate. When you compare loan offers pay attention to how the loan offers are structured. Mortgages with the lowest interest rates typically have unfavorable terms such as balloon payments so it is important to pay close attention to loan terms.

When choosing a mortgage offer you want to pick one with favorable terms and low fees. You can learn more about finding the best mortgage for your financial situation without overpaying for the financing by registering for a free mortgage guidebook: “Mortgage Refinance: What You Need to Know.”

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Interest only mortgages benefit certain homeowners for a variety of reasons. It is important to understand the risks associated with interest only adjustable rate mortgage before signing up for one. Here are several situations where an interest only mortgage makes good financial sense.

1. If you are self-employed or have sporadic income that you cannot document having a mortgage loan with the lowest payment amount possible would benefit you.

2. You are in a situation where you have lost part of your monthly income. Losing your job for example, an interest only mortgage could help keep your finances afloat until you find employment.

3. If you are a real estate investor seeking temporary financing while you sell a property. Interest only mortgages are ideal for short term financing of this type.

If you need the lowest mortgage payment possible, an interest only mortgage will typically reduce your monthly payment by 10 percent or more. To learn more about your mortgage options including common mistakes to avoid, register for our free mortgage guidebook.

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When you apply for a new mortgage loan the lender will use your FICO credit score to evaluate the risk of lending you money. The lower your FICO credit score, the greater a risk you are to mortgage lenders. Here are the basics of how your credit score affects your mortgage application and how you can improve your application when you have a poor credit rating.

Your credit score is calculated from your credit history. There are a number of factors in your credit history that determine the numerical value of your FICO score. These factors include the total and available amount of credit you have, your payment history, any late payments you have, and any negative information such as collections, write-offs, or bankruptcies on your record. This negative information on your credit history has a strong influence on your credit score.

Improve Your Credit Score

There is no quick fix for a poor credit rating. Repairing your credit score will take time, money, and patience. You can improve you credit score by paying all of your bills on time, maintaining low balances on your credit cards, and using credit responsibly. If you have negative information in your credit history it is important to settle with the creditor that placed it there and have it removed.

Qualify For a Mortgage with Poor Credit

If you have a poor credit rating and do not have the time necessary to improve your credit, you can still apply for a mortgage loan. Depending on the severity of your credit problems you may have to seek financing from a specialty mortgage lender that deals with bad credit loans. These lenders are often referred to as “sub-prime” mortgage lenders. You can learn more about your mortgage options including common mistakes many homeowners make by registering for our free mortgage guidebook: “Mortgage Refinance: What You Need to Know.”

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Bankruptcy can be devastating to your personal finances; however, it is the first step to getting yourself back on track. Remember that bankruptcy isn’t forever; the day after your bankruptcy closes you can start rebuilding your credit and qualify for a mortgage loan.

The first thing you need to do after your bankruptcy is final is establish credit. Open a small credit card account and maintain a low balance. The most important aspect of building credit is to make all of your payments on time and be responsible with your newly established credit accounts. If you have a significant amount of equity in your home you can use a home equity loan to establish credit. Home equity loans are easier to qualify for because the loan is secured by your home.

Preparing Your Mortgage Application

Mortgage lenders will accept your application as soon as your bankruptcy is finalized; however, you will pay more in fees and interest rates than if you waited. In as little as six months time you can build up enough credit to qualify for better interest rates and fees. During this six month period you can improve your financial situation by making all of your payments on time and using credit responsibly.

Comparison Shop For the Best Mortgage Loan

When you are ready to begin applying for home equity loans after bankruptcy, you will want to comparison shop before you accept any loan offers. Do your research and get interest rate quotes from a variety of mortgage lenders and brokers. You can learn more about your mortgage options, including common homeowner mistakes to avoid by registering for our free mortgage guidebook.

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There are a number of advantages to refinancing your mortgage loan. The benefits you will realize depend on your individual financial situation. When you refinance your existing mortgage you are simply taking out a new mortgage to pay off the balance of your old mortgage. The goal when refinancing is to secure a new mortgage with better terms and a lower interest rate than your old mortgage. The way to ensure you get a better mortgage is to comparison shop from a variety of mortgage lenders and brokers.

If your financial situation has improved since you took out your original mortgage you could qualify for a better interest rate. Improving your financial situation could be a larger income due to a new job or improving your credit rating. Another reason for refinancing is to secure a fixed interest rate for your Adjustable Rate Mortgage. If you currently have an Adjustable Rate Mortgage, you run the risk of rising monthly payments when interest rates go up.

If you have decided to take the plunge and refinance your mortgage you have several options to get started. Shopping for the best mortgage offer can save you thousands of dollars. When you compare mortgage offers you need to compare all aspects of the loans, not just the interest rates. If you neglect to compare all of the costs associated with the mortgage offers you could end up overpaying for everything from closing costs to lender fees.

You can learn more about your mortgage options, including common mistakes to avoid by registering for our free mortgage guidebook: “Mortgage Refinancing: What You Need to Know.”

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