Five Tips To Prepare For A Refi
Refinancing can be a challenge if you aren't prepared or even sure of what you are getting into. From your home equity (The true value) to the appraisal visit. Here are five tips to ensure your refi goes smoothly.
1. Determine your financial goal
Before you begin your refinancing expedition, the most important aspect would be to resolve why you would like to refinance. Refinancing your mortgage can be very beneficial in many aspects. It may be more cost-effective in terms of saving money with lower rates and monthly expenditures. However, if you are content with your current payments or aren't bothered with a payment increase, you could use the refinance to fast forward through your mortgage payments. Refinancing can help you merge your debts or get some cash payouts on your home equity to pay for some of those unforeseen expenditures such as medical emergencies or home repairs. Having a clear goal of what you would like to achieve through refinancing can give you a better picture of what type of loans you should be looking into for your refinancing.
2. Do the Math
Once you have pinpointed your reasons for refinancing, you can begin researching what kind of loan can best help you achieve what you are looking for. In essence, if you are looking to save on all your payments, fast-track your loan or just save on all the financial aspects of your loan's lifespan in general, a rate-and-term refinance will probably best suit your needs. If your reason is to merge your debt or get a cash payout, a cash-out refinance would probably be what you are looking for.
Furthermore, you should also pay attention to the kind of loan you want (Adjustable-rate or fixed-rate mortgage), the duration, or if you would like to get merits to counterbalance your final costs or lower your rates. Our convenient tool to help you get a rate quote will make it simple for you to understand how all the figures affect you and the amount you can save with refinancing. After you have created your account, you can generate your own loan estimation for handy explanations and breakdowns of all the relevant information and how it will affect the points you are considering, including all the costs related to your refinancing plan.
3. Clean up your finances
Getting the best refinancing loan out there will largely depend on the state of your finances. A higher credit score will allow for a better refinancing rates plan which can lead to more savings for the duration of your mortgage.
You may want to modernize and trim your savings before you begin to ensure that there aren't any nasty surprises ahead that may set you back. If your credit has been frozen, you may want to address it well before you begin so that anyone concerned has easy access to your scores at their convenience. Making sure that any and all tax claims against you are paid off well in advance will keep you from being rejected. Keeping your refinance lender in the loop as soon as any decisions are made will help them give you the best services possible. For example, if you have a second mortgage, deciding whether or not you would like to pay that off with the refinance should be done fairly soon and shared with the lender.
4. Gather your paperwork
The process for refinancing your house will be fairly similar to that of taking out the original loan and will include a lot of the same documents. Gathering everything beforehand will ensure that your lender will be able to help you in a timely and smooth manner. Examples of the documents are
- At least 2 or 3 years of personal tax return forms.
- The same amount of business tax forms if you own more than 25% of a business.
- 2 years of W-2s or 1099s
- 2 months of bank statements
- Proof of alimony or child support payments
5. Prep your home for the appraisal
The lender will very likely request a home appraisal to ascertain the market value of your home, do not panic as this will be like the appraisal for your original home purchase. This evaluation is key to determining the value of your home in terms of how much equity you have in your home. The higher the equity, the better the rates offered to you will be. This appraisal will be of even bigger importance if you are applying for a cash-out refinance. It will affect your eligibility and the amount of cash you will be able to take out.
The job of the appraiser is to take the following factors into account, condition of the home, value comparable to similar homes, as well as the size and features. Taking a few reasonable measures to ensure that your home is in excellent condition can help with the appraisal without breaking the bank.
Making sure that your home is up to scratch with all the current health and safety laws need to be your top priority. Making sure to check all smoke/carbon detectors and legal auditions. Failing to ensure any of the above measures before the visit, will most likely result in the appraiser having to postpone the appraisal. This can be costly, time-consuming, and downright frustrating, or worst case, cause your application to be declined. Finally, making your home aesthetically pleasing will boost your chances tremendously. Consider all unsightly repairs, such as broken windows or dripping taps, prior to the visit. Do a spring clean and set the scene as if you are putting your house on the market. Even the smallest details could up the home's value. Making a detailed list of all the auditions you've added to your home since purchase can help your lender compare the home to related properties.
Refinancing with HomeTown Lenders is an easy and seamless process. Contact us to today to learn more about our team and what we can do for you.
