Establishing your objectives and preparing your finances are the major steps in coming out ahead in real estate. If you know what you want, you will get the best refinance rates. Here are the tips that will help you to get the deal that you have been looking for.
1. Is my credit as high as it possibly can be?
You will get the best refinance rates if you have a credit score of 740 or above. Anything below that can be worked on, as you will pay a higher rate than the top tier borrowers.
Once you get into the 700 to 740 range, improving your score can become somewhat esoteric, but it can be done. You will need to drill down into the particulars of your debt to income ratio, your debt exercise to debt available margins, and your monthly expenses. Reduce your debt to income ratio to below 25 percent if possible. Exercise less than 30 percent of your available debt, and reduce to your monthly expenses to the closest number to zero that is legal and practical. After six months of hard work, take this score into your banking office.
2. Have I lowered my debt?
One of the simple things that you can do to get a better refinance rate is to lower your total debt. If you have a car note, pay it off completely. Pay all of your bills on time. If you are having trouble meeting the minimum payment on any credit card, consolidate or rework the payment until it is inside of your monthly budget. Paying a smaller amount is better than not paying enough.
Do not take on any new debt with your freed up funds. Do not even buy any large itbs with cash, because you will need that as well.
3. Is my home equity maxed out?
If you are able to save any substantial monies from debt reduction, the best place to put it is in your home equity. The loan to value statistic is the metric that you are trying to affect, and you want it as low as possible. If your mortgage is underwater for some reason, then you may look to a Home Affordable Refinance Program (HARP) in order to get yourself back in line.
4. Are my finances organized?
You may have the income and the low debt, but if you do not present the information to your lender in a professional way, then you lose some of the impact of your hard work. Do not go through the actual work of getting your finances together and then lose it during the presentation. Get as many years of your W-2 forms, your pay stubs, and your bank records as you can. Put thb in a folder together, in order, and have thb ready for your next meeting along with your applicable loan metric calculations.
5. Do I have cash?
The cash that was mentioned above will give you some good use now; lenders are very happy to see a borrower that thought ahead to bring cash to cover closing costs. If you organize your records correctly, however, your lender may even trust you enough to let you roll these costs over into your loan. Contrary to common sense, however, you are more likely to achieve this privilege from your lender if you do not need it because you have cash on hand.
6. Am I shopping for the best rate?
Once you bring all of your metrics dow, your credit up, and put it all into a folder nice and neat, you become a very attractive option for many lenders. Do not limit yourself to your primary bank; many borrowers get a better rate from a second bank on a refinance. You may be able to negotiate a better rate just because you have offers from other banks, so make sure that you fill out more than one loan application during this process.
7. Have I decided on a loan term?
The term of the loan makes a big difference in the equity that you will be able to pull from a refinance. You also need to consider your needs. If you are looking for low monthly payments so that you can redirect funds to an adult education program, then your term will be different from the borrower who is looking to pay off the loan as quickly as possible.
The seven tips above will give you a lightning head start in getting the best rate for your refinance. Do not stop looking until you have a rate and a term that fits your needs, especially if you have followed all of the advice above to the letter. Rbbber that you are in control of your finances at the end of the day, and do business with the lender who recognizes that you are doing that business a favor at the end of the day.
2 Point Highlight
If your mortgage is underwater for some reason, then you may look to a Home Affordable Refinance Program (HARP) in order to get yourself back in line.
The cash that was mentioned above will give you some good use now; lenders are very happy to see a borrower that thought ahead to bring cash to cover closing costs.
