Very few life happenings can make you feel happier, like buying your first home. That’s why before choosing a home loan, you need some due diligence to get the best rates in the market. However, as you continue to pay your home loan, the terms you might have found favorable might not be the case a few years down the line. Luckily, you can refinance your home loan with the help of reliable brokers like TundraMortgageBrokers.
However, just like applying for any other loan, be prepared to increase your chances of getting approved. If prepared with all the documents you need, it will take you a short time to get the credit. Here is what to know when refinancing your home loan.
What Is Refinancing a Home Loan?
If you have not completed your home loan payment, you will need to repay monthly until the loan completion. Refinancing a home loan is choosing another financial company to give you a new loan so you can pay off the one that already exists.
The new loan will bring new terms, rates, repayment duration, and fees. However, before you decide to refinance your home loan, know the following:
Optimize Your Credit Score
One of the criteria lenders use to determine if you qualify for the mortgage financing process is reviewing your credit history. Lenders have tightened the standard of their loan approval in recent years. Having good credit no longer implies that you will get the lowest interest rates.
You need to have a credit score of 760 or higher to qualify for the lowest interest rates. However, borrowers with the lowest scores can also obtain loans, but the fees or the interest rates might vary.
Consider the Equity of Your Home
Knowing the equity, you have on your home will help determine the amount of money you get when you refinance your home loan. If you have a 50% equity or more, it will be easier to qualify for a new loan.
However, it might be impossible to get a loan if you refinance with little or no equity. That is why before you start applying for home loan refinancing, keenly look at the home equity you have.
Most homeowners assume that as long as they have a good credit score, it will be easy to get a home refinancing loan. But the truth is lenders will also need reassurance that you can repay the loan.
Though some factors like having a stable job, saving, and high-income help as long as they have a good credit score to increase your chances of getting financial assistance, the lenders will also need to look into the debt-to-income ratio.
Most lenders want to keep the monthly house payments to 28% or less of your gross monthly income so that you do not strain to make the payments. They will also consider the other loans you are paying to ensure the debt-to-income ratio does not exceed 43%.
Set Clear Financial Goal
Some lenders will want to know the reason you are getting the mortgage refinancing. You need to set clear goals and ensure you are clear about why you seek the loan. Some goals include:
Reducing interest rate: One of the reasons homeowners use to seek home loan refinancing is to reduce their interest rates by restarting the clock on their mortgage. With this option, you may pay less each month, but you might end up paying more over the life of your loan.
Reducing the loan duration: The other reason to choose to refinance your loan is to reduce the length of time you will pay the mortgage. Though you might have to pay more cash each month, the overall cost will be less since you are paying it for a few years.
Give Accurate Information
You will be required to fill a form about your finances. Ensure you’re honest and transparent about your financial situation. The lender will consider your net worth and your credit to determine if you qualify for refinancing.
They might also ask for proof of documents like a bank statement, federal tax, and pay stubs. To avoid complications, it is best to disclose your assets and liabilities upfront. If you have the documents ready before starting the refinancing process, the whole process will go smoothly.
Have an Appraisal Done
The credit company will want to know the value of your home. They might even ask you to use a mortgage finance appraisal for the project to get an accurate value of your house. If so, you might need to get an appraisal to value your home. It is better to do the appraisal beforehand because it will help in speeding up the process.
Choose the Best Company
Once you have determined you need a refinancing loan, it is time to shop around. Note that many companies offer these loans, but not all will give you the best rates. That is why it is vital to get a quote from at least three companies and compare the rates.
From this, you get to choose a company that will offer you the loan at the best rates. You also need to compare the fees and any other charges as they could impact the overall cost of the loan. In addition, consider the company’s experience and reputation.
Talk To Us for the Best Home Loan Refinancing
Getting loan refinancing can be hectic and stressful, but we are here to help you have an easy time with your application. We are also willing to teach you everything you need to know about loan refinancing. Do you have any questions about our service, rates, or requirements? Reach out to our competent customer service.
Thanks to our rates and terms, we’ve served multiple clients; our home refinancing loans range from 5-30years. Again, we allow you to choose a duration comfortable for you. If you are not sure what you want, let’s help you with the calculations to make an informed decision. Reach out to us now!