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10 Things to Consider about Doing a Mortgage Refinance

Current mortgage rates have fallen near record lows, but should you move to do a mortgage refinance? Here are 10 things to consider if you’re thinking about refinancing.

  1. Consider a 15-year mortgage if you have a low balance. Fifteen-year mortgage rates averaged 4.36% last week, the lowest rate since Freddie Mac began tracking the rates.
  2. Consider paying points to get a lower mortgage rate. Generally, you can lower your mortgage rate by about 0.25% for each point you pay.  Each point will equal 1% of the total amount of your mortgage.
  3. Use a loan calculator to figure out what your monthly payments will be after refinancing. A loan calculator also can show the break-even point for recouping fees paid to refinance.
  4. Check out home values in your area before applying to refinance a mortgage. This will keep you from being surprised by a low appraisal during the refinance process. Keep in mind that if you live in an area hit by a lot of foreclosures, it may be difficult to get a high enough appraisal to refinance if you don’t have a lot of home equity.
  5. Don’t apply for a mortgage refinance until after you’ve reviewed your credit report. Make sure all information on your report is accurate. If you have a poor credit history, you may be turned down for refinancing.
  6. Don’t apply for other types of credit before getting approved for a mortgage refinance. Too many credit inquiries or newly opened lines of credit are red flags to mortgage lenders.
  7. Ask mortgage lenders to provide a Truth-in Lending Disclosure and Good Faith Estimate before paying an application fee or a rate lock-in fee. Some lenders may balk at doing this, but anyone who wants your business should be able to give you this information.
  8. Make sure you continue making payments on your current mortgage. You are still responsible for the payments until you close on the refinance.
  9. Comply with the mortgage lender’s request for documentation of income, income taxes, financial statements, etc. Dragging your feet on getting these documents together can delay closing on your home loan.
  10. Just because mortgage rates are low doesn’t mean you should refinance. Talk with an experienced mortgage counselor if you need help deciding whether or not refinancing will help you.

Countdown to Your Mortgage Closing

If you do refinance your mortgage, be patient. Mortgage lenders have been overwhelmed by requests for loan modifications and refinancings so it make take a little longer than you want to get to closing.

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