Refinancing your home can be a great decision as interest rates are at historic lows. It potentially could save you money, and who doesn’t want more cash in your wallet?
When you refinance your home, you essentially replace your current mortgage with a new loan and new terms. But first, you should answer some important questions. What is it that you want out of it? Are you looking to decrease your monthly payments or shorten the timeline of the loan? Are you looking to pull out equity for a home improvement upgrade?
Whatever your reason, you should understand the ins and outs of refinancing so you can get the most bang for your buck. Our experts at True Concept Title share five home mortgage refinance tips so you can make the best financial decision for your home and family.
1. What Is Your Credit Score?
Knowing your credit score is first on the list. That number plays a crucial role in determining what you qualify for in interest rates and loan types. The better your score is, the better rates and loans you will receive.
If you don’t know your score, you can run a credit report through the three major reporting bureaus: Experian, TransUnion, and Equifax. Awareness of your credit score also gives you a chance to focus on improving it before you decide to refinance. If you choose not to run a credit report, the lender will check your scores during the refinance process.
2. Know Your Equity
It is essential to know the value of your home equity when you are considering refinancing. Equity is the percentage of your home that has been paid off. You can find this on your mortgage statement, where the payoff amount of your principal balance is listed.
Some homeowners refinance with the idea of taking out cash to cover home repairs, home improvements, or to pay down debt. If there is no equity or too little in your house, you will not qualify for a cash-out refinance.
3. Be Ready for the Appraisal
Your home will be appraised during the refinance process, which will show that your home’s value matches up with your new loan. If your home is not worth as much as the loan you want, the lender will not approve it. Ideally, you want your home appraisal to be higher than what you paid. Your increased assessment also will help with an increase in home equity.
Our title experts at True Concept Title have listed what a homeowner can do to show off the home to an appraiser:
- Make available to the appraiser a list of all the upgrades you have done to your home. Some upgrades are harder to spot.
- Improve your home’s curb appeal. The front of the house is the first thing people see, and a tidy appearance can drastically increase the home’s overall value. Before appraisal day, spruce up the landscaping, mow the lawn, and put away children’s toys and yard equipment.
- Clean the inside of the home. If it appears clean, organized, and airy, it can influence the appraiser’s assessment. Set the thermoset to a comfortable temperature, open window coverings, make the beds, and put animals out of the way.
4. Respond and Communicate Quickly
Refinancing a home loan can take 30 to 45 days. You can help the process along by being responsive and open to communication. As your lender works through the application, additional supporting documentation such as work or financial history may be requested. Make sure you promptly follow through on phone calls or requests for documents.
5. Remember to Consider Closing Costs
As with a regular home loan, when you refinance, you must pay closing costs. Generally, you can expect closing costs to equal about 3% to 6% of your purchase price.
Closing cost fees often include:
- Application fee
- Appraisal fee
- Inspection fee
- Attorney review and closing fee
- Title search and insurance
Most of these costs are paid at closing, but a couple of scenarios allow you to work around or build in those closing costs. Talk with your realtor, lender, or our closing team at True Concept Title to determine which plan makes the most financial sense. For example, if you waive immediate closing costs, you may have to take on a higher interest rate, which likely means you will pay more money over time.
Refinance Today with True Concept Title
Now that you have reviewed these mortgage refinance tips, you may be ready to proceed with refinancing, in part due to diminished mortgage rates.
Our True Concept Title team is prepared to guide you through the process to ensure you receive the best interest rate and loans. Contact True Concept Title at (813) 263-7168 or toll-free at (866) 651-6224.