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5 Things You Need to Know About Refinancing Your Mortgage

If you’ve never refinanced your home before, it may be confusing at first. What does it mean to refinance your mortgage? Refinancing means replacing the mortgage you currently have with a better one that includes better terms. Before you refinance, here are five things you should know…

  1. Not All Mortgage Lenders Are Created Equally 
    1. Some lenders aren’t trying to get you the best price. Know who you can trust and who can save you money. Do your research.
  2. Know Your Credit Score
    1. If you want a lender to give you a good loan, you need a good credit score. Experts say that a credit score of at least 740 or higher will get you the best deals. You might find yourself having a hard time with lenders if you have a score below 700. 
  3. Know Your Home’s Equity
    1. Equity is the value of your home, not including any loans or liens. A home’s equity can increase or decrease over time from many different factors. There are many real estate sites that can give you a ballpark estimate on your home’s value
  4. Know Your Debt Ratios
    1. Know if you can even afford the loan in the first place. In order to qualify for a refinance, your new mortgage payment including taxes and insurance should equal less than 30% of you monthly gross income. Also, the total of all your debt payments should equal less than 40% of your gross income. 
  5. Know What Documents You Need
    1. Make sure you can obtain documents such as tax returns, paystubs, credit reports, statements of assets, and so on, before you apply for refinancing. 

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