Finding the best refinance rates on your home mortgage will take some shopping around to find the best terms. It also will require some work on your part so that you can qualify for the refinancing package that best suits your needs and wallet.
A priority for anyone in the market for a refinance loan, and for their own general financial health, is to raise your credit score and to lower your debt. Often, these issues go hand in glove, so it is possible to accomplish both at once.
Raising your credit score is vital, since most lenders will require a score of at least 620 or 640. That level only will qualify you for a loan. You still will likely be paying a higher interest rate unless you can arrange your finances to reach a score of 740 or above.
Improving your score depends a lot on how you handle your credit. So be sure to pay bills on time and work to pay down the amount of your credit card debt. This also will help improve your DTI, or debt-to-income ratio, so that you do not owe an amount that is more than 36 percent of your total income.
This is an important consideration lenders look at to see if you pass muster and qualify, since many consider it even more important than a high credit score. So do not buy any big ticket items, like a car, or fill out multiple applications for new credit cards prior to obtaining the refinance agreement.
As you await refinancing, be sure to save some cash to cover the closing and other costs that may be involved. Figure that you will need about two percent of the amount of the loan, which is the industry average. If you cannot save the extra dollars, it is possible to have the closing fees included in the loan.
Finally, before taking on the search for the right refinancing package, be sure your financial documentation is in order. Apply to receive your credit scores from the three major bureaus and make sure there are no mistakes, since errors can delay or halt a refinancing deal. Also, you most likely will need two years worth of W-2 forms and tax returns. In addition, you will be asked to show two recent pay stubs and the two most recent statements from your bank and the companies handling any other investments.