5 Things You Need to Know about Refinancing Your Home for the First Time
If ads on the internet or the television have made you think about refinancing your home, then there are several things you need to know before you head to see a mortgage provider.
Usually, homeowners who go in armed with the correct information have a better chance of refinancing their homes.
Here are some things you need to know.
When to Refinance
While there may be specific government programs that help you refinance your home with little or no equity, normally you can get a better rate if you have about 20 percent equity in your home.
That may not be as difficult as it sounds if you have done remodeling projects that have raised the value of your property.
You may want to think about getting a property assessment done before seeing your mortgage broker to show the increased value.
Additionally, depending on the housing market where the home is located, it may have become more valuable because of current conditions.
Know Your Credit Score
Most lenders will look at your credit score before they approve your loan for refinancing.
Therefore, get ahead of the game by requesting your credit score from Equifax, Experian, and TransUnion.
Examine the report to make sure that there are no errors in it before seeking to refinance your home.
If you find errors, then ask for them to be corrected. Additionally, make sure that you pay off any small items that you may have forgotten about.
The best loan rates usually go to people with credit scores of 720 and above, but you can always give it a try because there may be other programs available that will help you.
Determine Your Debt-to-Income Ratio
It only makes sense that mortgage lenders want to make sure that you have enough money to pay your new loan.
Generally, they want to see a debt-to-income ratio of less than 36 percent.
You can calculate this percentage at home by figuring your total monthly income and your total monthly bills.
Additionally, most lenders hesitate if your total monthly housing expense is more than 30 percent of your total monthly income.
You can adjust these numbers by raising your income or lowering your bills.
Think about Your Goals
Homeowners have different goals. If you want more expendable income after you pay your mortgage, then look for a lower interest rate.
On the other hand, if you want to get your home paid off as quickly as possible, then look for a mortgage with the shortest terms.
In either case, making extra payments can lower the length of your mortgage and the amount due each month.
Choose the Right Mortgage Provider
There are many different mortgage brokers available to most people with good credit.
Consider using one who has the experience to figure out how to help you the best.
Working with a provider who understands government and private financing products can help you arrive at the best solution for your circumstances.
Additionally, make sure to check their ratings so that you know that you are dealing with an honest provider.
Use these ideas and your own ingenuity to get the best refinance offer possible.
The result may be that you can say that you have your home paid off sooner.
Hopefully this is the case for you. If it is, imagine all of the money you can start putting toward other things rather than your monthly house payments.
Ultimately at the end of the day, being able to pay off your home sooner means more money in your pocket.
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Category: Housing
