Homeowners seek to refinance their home loan for a number of reasons, such as to take advantage of lower interest rates, to reduce the size of their monthly payments, to trade an adjustable-rate mortgage for a fixed-rate one or to refinance their Owner Financed note so the mortgage is in their name. The specifics of the process may vary depending on the actions of both the lender and the borrower.
Most refinancing starts with homeowners identifying why they are seeking a new mortgage. In some cases, they may just want to capitalize on a drop in interest rates. Other times, though, homeowners may seek a less conventional mortgage, such as one that would free up a large amount of cash quickly. Homeowners should identify their precise goals and use them as a measurement against which to assess the mortgages into which they can refinance.
When preparing to approach lenders, mortgage holders should gather as much documentation as possible regarding their current loan, their credit history and their current income. This information gives potential lenders a better idea of the likelihood that a borrower will successfully pay back the loan. At the least, documentation should include income tax returns, savings and investment information, an accounting of monthly debt load and a credit report.
Homeowners should then apply to various lenders to see what mortgages are available to them. While those seeking to refinance may want to begin with their current lender, who may be willing to give them favorable terms based on their relationship, they should consult as many lenders as possible to get the broadest range of offers. Applications are generally free or low-cost, so homeowners have little to lose in reaching out to different lenders.
(Start with the Forte Properties & Efinity Lending mortgage loan prequalification form.)
Narrowing Down the Options
After receiving a number of offers, homeowners should begin to get down to brass tacks by narrowing their possible mortgages down to a handful. For each of the loans, they should request a full accounting of fees, such as appraisal fees, loan origination fees and closing costs. According to the Mortgage Finders Network, lenders must offer potential borrowers a rundown of all fees within three days of receiving an application.
Closing the Deal
When homeowners have compared all offers, they should select the one that best meets their needs. If possible, they may want to have an attorney inspect the terms of their new mortgage before signing it, to make sure it’s sound. Once they’ve made their final decision, borrowers should act quickly to lock in their terms while they’re still available.