Refinancing mortgages is something many consumers do. As the Federal Reserve drops rates to historic lows, more homeowners look to refinance their mortgages. Some do it for a lower rate, a better monthly payment, and a grand total of less interest paid over the life of their loans. Others do it to take out some equity in their home, extend the life of their loan, and have a bit more financial freedom. The why behind consumer’s decisions to do this is unimportant in comparison to the how. How will consumers find the lowest refinance rates? There are a few tips that might help.
Check Your Credit
If your credit is imperfect, you won’t qualify for the lowest rates. Check your credit before you apply for any mortgage, and see if it’s where it needs to be. You want to see your score, but you must also check to see there are no mistakes on the report.
Fix Mistakes on Your Credit
Your credit could contain mistakes, which is why you check. If you find mistakes, contact the creditor who made the mistake as well as the credit bureau. Do both in writing, present your evidence, and ask for a chance. The creditor has 30 days to correct or dispute your issue with the bureaus. If they don’t, your score is changed.
Pay Off Debt
If you have debt, your debt-to-income ratio is high. If you can pay off debts and make that smaller, you can qualify for a better rate and a bigger mortgage. Debt is never positive, so pay it off as quickly as you can to increase your credit score and your credit profile.
Try a HARP Mortgage
If you owe a lot of on your home and you have a lot of debt, this might be the best solution for you. It’s a government-backed program that offers homeowner assistance for those who don’t have their finances in perfect order.
Closing is expensive, and you can get a better rate if you pay your closing costs out of pocket rather than financing them. It’s up to you to find a way to make this happen, but you can save for a few months before applying for a mortgage, or you can take money from your savings account to make these payments possible.
Never accept a first offer without first checking out all the other offers available. You can do this online by asking different banks for rate quotes, and by checking to see where the lowest rates are possible in your area. It’s far easier than you assume, and it’s also something you can do without much effort. Pick the best and go from there.
Get a Co-Signer
Do you have a spouse who has better credit who can co-sign this loan with you? It helps to know that someone can do this, and that you can get a lower rate as a result if their credit profile is more promising than your own.
Check Different Loan Options
There are loan options available to you that you might not even know exist. Ask around for different tips and advice from banks on how you can get lower rates for your personal financial situation. Someone might have an option for you that you didn’t know existed.
Speak To Your Credit Union
Is your credit less than perfect? If you have a long-standing relationship with a credit union, you might find it’s easier to apply for a loan with them than it is to apply elsewhere. Credit unions have a reputation for willingly working with their customers even if they have less than perfect credit. It’s a great solution.
Know Your Options
If you have imperfect credit, you must know your rates won’t be as low as others. This doesn’t mean you can’t get a low rate for your particular score, but you do need to know you won’t get the lowest offered rates by any lender.
Be Upfront with Your Lenders
When applying for a refinance, talk to the lender and discuss your financial history with them. If you can get them on board with your life, you might get a better rate. For example, if you can explain to them why you made late payments at some point, they might be more willing to work with you now.
Take Your Time
If you can wait a year to refinance, you can pay down debts and improve your credit score. This raises your chances of getting a lower rate, and it’s always worth the additional time it takes to make it happen.
Refinancing your home should be more affordable rather than more expensive, which is why these options are usually the most helpful.