Due to the emotional roller coaster ride known as the economy, there are more and more people who are refinancing their home loans so that they can get a lower monthly payment and to build additional equity in their home. However, it’s not a given that just because you want to refinance that a refinancing company will automatically approve you. Matter of fact, there are several factors that not only impact if you are eligible for refinancing, but also the interest rate that you will receive if you do.
Check your credit. Your credit score is something that strongly impacts basically every financial decision that you make, including (and on some levels, especially) when it comes to refinancing a home. A good credit score (the high 700s), then you’ll get a lower interest rate; however, the lower it is, the higher those rates will become. So, before applying to refinance, check with all three credit bureaus (Equifax, Experian and TransUnion) to confirm your score and in the meantime, make sure to pay your bills on time. Late payments are another thing that doesn’t reflect well on a person’s credit history.
Decide on the kind of loan you want. Let’s say that you are looking into some VA home loans. Some things that you need to consider are the following: What are the loan terms that you’re applying for? (A 30-year loan is going to have a higher interest rate than a 15-year one will.) What is the loan amount that you’re requesting? (The larger your down payment is, the lower your interest rate will be as a direct result.) And finally, what is your loan-to-value ratio? (This refers to how much the house is worth vs. the amount that you owe on it.) Another thing to keep in mind is that condo owners tend to pay a bit more in interest than single-family homes and townhouses because lenders find condominiums to be a bit more of a risk, so before speaking with your lender, be prepared to have answers to all of these questions.
How much do you currently have left to pay? When it comes to refinancing, one of the greatest factors is determining how much you have left to pay on the current mortgage that you already have in place. In order to get good refinancing rates, you will need to have paid at least fifty percent of the current mortgage that you have and you will also need to have made your payments on time.
In searching for the refinancing company that works best for it, it’s good to keep in mind that once you’ve done all of your prep work (you know the kind of loan that you want and you’re confident that you’ll get approved for it), you should spend some time shopping around. In other words, don’t go with the first company that seems comparable to your needs because with a little bit of patience and research, you may actually find a company or bank that will top the rate that you were offered by one of its competitors. Even if it’s just half of a percentage point, that can still be a noticeable amount of difference over time. After all, you’re refinancing to get a little breathing room, not to suffocate under even higher interest rates, right? Right.
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