Ready to make a change to your mortgage? Find out if refinancing is right for you!
If you’re looking to take advantage of the low rates available right now and refinance your mortgage, consider the following mortgage refinance tips first so you can best manage expectations.
- Determine your refi goals – Determining whether you want to lower your rate, shorten the term of your loan, switch to a fixed-rate mortgage or other reason will help you understand potential benefits to your financial picture.
- Understand your equity – Your lender will verify your home’s value during the refinance process by ordering an appraisal, but you can use a home value estimator to get an early idea.
- Decide which mortgage refi type is right for you – There are several options available. It’s best to walk through choices with your lender to understand all benefits.
- Check your credit score and debt to income ratio – Refinancing your mortgage means you’ll need to meet many of the same eligibility requirements you did when you bought your home. Your lender will check your credit score and DTI ratio. If you’ve improved your credit and finances since buying your home, you could earn a lower rate.
- Seek preapproval with the credit union – Work with a loan rep at the credit union to secure your financing and lock in your mortgage rate. Your rep can give you a list of the documents you need to have ready.
- Understand closing costs – Mortgage refinance closing costs range from 2% to 6% of your loan amount. You’ll need to decide whether you’ll pay out of pocket or finance the costs into your new mortgage. If you finance them, your loan amount and monthly payment will increase, and you’ll pay more in interest over the life of your loan.
- Prepare for a home appraisal – Your lender will need to verify your home’s current market value. If the appraisal comes in too low, you may have to make up the difference in cash or hold off on your mortgage refinance.
- Understand the closing – Refinancing your mortgage could take up to a month or two. At closing, check that all the paperwork is correct and your new escrow account is properly funded.
Be cautious and make sure a mortgage refinance makes sense for your specific situation before moving forward. If you have questions, contact the credit union, or our knowledgeable mortgage partners at CUFS so we can walk through the process with you!