If you are considering mortgage refinancing but are uncertain if you can qualify for a new loan there are steps you can take to improve your chances. It’s no secret that mortgage lenders have tightened their standards for loan approval and in today’s economy many homeowners are feeling the pinch.
Here are several tips to help you qualify for a new mortgage and lower your monthly payment in the process.
Mortgage lenders rely on a number of factors when evaluating your financial history. Depending on your income and credit you will qualify for different types of mortgage loans. Your monthly payment is also affected by your credit as this amount is determined in part by the mortgage rate you receive. Another factor determining your payment amount is the term length you choose for repayment. For example a common mortgage term length of repayment is 30 years.
Check Your Credit before Applying for a New Mortgage
Mistakes in your credit reports will drag down your credit score like a lead balloon. There are three reporting agencies that you’ll need to request your credit reports from before refinancing your mortgage. If you find mistakes in your credit report you’ll need to have them corrected.
Also, it helps to pay down the balances on your credit cards if you have maxed out their limits. You don’t have to pay for credit reports as Congress passed a law requiring these agencies to provide you with a free copy of your credit report every year. You can request these free copies by visiting the website annualcreditreport.com.
Understanding Mortgage Rate Quotes
Once you’re certain that your credit reports are accurate the next step is to find the right person to arrange your mortgage loan. Mortgages are retail products and are generally resold by mortgage brokers and other financial companies. You will always get the best deal by finding the right mortgage broker for the job.
Banks and Credit Unions are exempt from disclosure legislation that protects homeowners by requiring them to disclose their profit margins and markup on your loan; you’ll never get as good a deal refinancing through your bank or credit union. This doesn’t mean mortgage brokers are perfect…far from it, brokers work for a commission so the loan that gives your broker the highest commission is probably not going to be the loan you want when refinancing.
The first thing you should know about mortgage rate quotes is that they almost always include markup to give the mortgage company or broker a commission. It is this markup that drives up your monthly payment unnecessarily. Finding the right mortgage broker to arrange your loan means finding one who is willing to negotiate this markup in exchange for a flat origination fee. It is possible to refinance your mortgage paying only a one percent origination fee to the broker.
You can learn more about refinancing without this markup of your mortgage rate and payment amount by registering for the free video guide found on this website.