Refinance Home Mortgage Guide

If you are planning on taking out a home mortgage refinance loan there are steps you can take before applying to make sure the application process goes smoothly. Ensuring that there are no unforeseen delays in the closing process will prevent your rate lock from expiring before you close on the loan.

Organizing your home mortgage refinancing efforts will make life easier for everyone involved with your application. Here are several tips to help you prepare the necessary documentation before applying for your home mortgage refinance loan.

First, you will need a months worth of pay stubs from your job. If you are self-employed you need the last two years tax returns and the schedules you filed. Track down the w-2s from your employers going back two years. Your lender will use this information to document your income when approving your application.

Additionally, you will need the following documents:

• Two months of your most recent statements for bank and investment accounts.

• Your title insurance policy, homeowner’s policy, and the most recent statement from your lender with contact information.

• The payoff balance of your existing mortgage loan.

• The most recent survey and appraisal of your home.

Preparing for your home mortgage refinance loan before applying will make your life easier during the time it takes to get your loan approved and close on the mortgage. You can learn more about your mortgage refinancing options, including costly mistakes to avoid by registering for our free mortgage refinancing tutorial.

The decision to refinance your existing mortgage is clear cut in many financial situations. If you’ve had your mortgage for more than five years, prevailing interest rates could be several points lower than what you’re currently paying. If your financial situation is different from when you purchased your home you may also qualify for better mortgage rates.

Another common reason for mortgage refinancing is to cash-out equity in your home. You can use this money to consolidate your bills, renovate your home, or pay for education. If you’ve decided to go forward with mortgage refinancing, here are several tips to help you avoid refinance mortgage problems.

Refinance Mortgage – Take Stock of Your Finances

Before refinancing your existing mortgage, make sure you can afford the payments if you are taking cash back. Whenever you borrow against the equity in your home your payment will go up regardless of the interest rate you qualify.

Because mortgage refinancing is simply taking out a new mortgage to pay off the old one, you will be required to pay many of the same expenses you paid when purchasing your home. Your new lender will require you to document your income and will verify your employment. You may be required to pay for an appraisal, title search, survey, credit reports and legal fees. You can reasonably expect to pay as much as 3% of your loan upfront in origination fees and closing costs.

Refinance Mortgage – Avoid Additional Debt

If you are refinancing your mortgage to payoff bills, it is important to stop spending. Because your mortgage payment after cash-out refinancing will be higher, additional bills could create a financial hardship. If you fall behind on the mortgage you risk losing your home. Continue with the same spending habits that got you in debt and you’ll find that you’ve wasted your home equity.

Refinance Mortgage – Know Your Options

You can learn more about your mortgage refinancing options, including costly homeowner mistakes to avoid by registering for our free mortgage tutorial:

Refinance Mortgage - What You Need to Know

When applying for a mortgage it is important to compare mortgage fees to get the most competitive interest rates and closing costs. Many homeowners mistakenly assume choosing the mortgage with the lowest rate guarantees them the best deal. These homeowners frequently overpay because they do not compare mortgage fees. Properly comparing mortgage fees will help you avoid the majority of mistakes homeowners make. Here are several tips to help you compare mortgage fees to ensure you do not overpay for the loan.

Compare Mortgage Fees: Check Loan Processing Fees

The best way to compare mortgage fees is by using the Good Faith Estimate. Mortgage lenders are required to provide this document to you after you apply for the loan; however, most mortgage companies will give you a copy if you ask. Locate the loan processing fee on the Good Faith Estimate and determine who the fee is paid to. Loan processing fees are often paid to a third party; however, this fee should not be higher than $400.

Compare Mortgage Fees: Loan Origination Fees

The next item to look for when comparing mortgage fees is the origination fee. If the mortgage is for a home you will live in the origination fee, often referred to as “origination points,” should not be more than 1% or 1.5% of the amount you are borrowing. If the mortgage is for an investment property the origination fee should not be more than 2% or 2.5% or the loan amount.

Compare Mortgage Fees: Watch out for Junk Fees

Mortgage companies are notorious for lining their pockets at your expense with junk fees. When you compare mortgage fees look for anything on the Good Faith Estimate that resembles a mortgage broker administration fee, computerized loan origination fee, lock fee, mortgage application fee, or courier fee. These are unnecessary junk fees you should never pay. If your mortgage company refuses to remove these fees, find one that does not pad their loans with junk fees.

When you carefully compare mortgage fees from a variety of lenders it will ensure you do not overpay for your next mortgage loan. You can learn more strategies to compare mortgage fees and avoid costly mistakes by registering for a free mortgage tutorial.

Mortgage Refinancing can save you a lot of money if you avoid costly mistakes. Rather than trying to predict future mortgage interest rates your time is best spent researching mortgage lenders and comparison shopping for the best loan. Here are three mistakes you need to avoid when mortgage refinancing to avoid overpaying.

I. Trying to Predict Lower Mortgage Interest Rates

Mortgage interest rates are extremely difficult to predict. No one can reliably predict or guarantee where interest rates are headed in the future. Anyone that tells you they can is selling something. Rather than trying to time the market, carefully comparison shopping mortgage offers will help you avoid 90% of the mistakes homeowners make when mortgage refinancing.

The Internet makes it easy to compare loan offers from dozens of online mortgage lenders and brokers. Be careful with the mortgage sites you choose and review the licenses and disclosure pages to avoid paying a Computerized Loan Origination fee. Many sites like Lending Tree will charge you as much as $1300 just for filling out a contact form on their website. These sites claim there is no fee for their services; however, reading the access and disclosure reveals your mortgage lender will charge you the Computerized Loan Origination fee.

III. Not Shopping For the Best Interest Rate When Mortgage Refinancing

Many homeowners make the mistake of choosing the first mortgage lender that approves their application. If you skip comparison shopping, you will not know what fair rates and fees are for a homeowner in your financial situation. Every mortgage lender has different criteria for evaluating your credit and quoting you an interest rate. If you request quotes from seven different mortgage lenders you will receive seven different interest rates. This is why comparison shopping is so important when mortgage refinancing.

III. Assuming the Lowest Interest Rate is the Best Deal When Mortgage Refinancing

Many homeowners mistakenly assume the mortgage offer with the best interest rate is the loan that will save them money. Choosing the wrong type of mortgage just because it has a great rate could result in overpaying thousands of dollars, it could even cost you the home. Choosing the best loan for your financial situation means choosing the mortgage with the right interest rate, term length, lender fees, and closing costs. You can learn more about comparison shopping for the best mortgage while avoiding costly mistakes by registering for a free mortgage tutorial.