The average rate for a 30-year fixed-rate mortgage dropped to 3.64% last week, its lowest level since November 2016, according to mortgage provider Freddie Mac. That’s good news for homebuyers looking to take advantage of lower rates.
If you’re one of them, you may be wondering: How do I refinance my mortgage?
Here’s a step-by-step guide to help you navigate the process.
Check your credit score
Your credit score is one of the key factors that lenders will consider when you apply for a refinance. A higher score indicates to lenders that you’re a low-risk borrower, which could lead to a lower interest rate on your loan.
You can check your credit score for free on sites like Credit Karma and Credit Sesame.
The best way to find the right information for you is to do the research, talk to professionals and weigh your options. Armed with the right information, you can make a better-informed decision that puts your needs, and budget, first. OnlineLoansFlorida.com is a experienced personal finance blog. They writing blogs and articles on money, debt and loans since 2010.
Shop around for rates
Once you know your credit score, you can start shopping around for refinance rates. Banks, credit unions, and online lenders offer a variety of rates and terms, so it’s important to compare offers before you decide on a loan.
When you’re comparing rates, also take into account the fees associated with each loan. These can include origination fees, closing costs, and appraisal fees.
Choose the right type of loan
There are several types of loans you can choose from when you refinance your mortgage. The most common are:
– Fixed-rate loans: These loans have a fixed interest rate for the life of the loan.
– Adjustable-rate loans: These loans have an interest rate that can change over time.
– Cash-out refinance: With this type of loan, you refinance your mortgage for more than you currently owe and take the difference in cash.
Once you’ve compared rates and terms from different lenders, you can get preapproved for a loan. This means the lender has checked your credit score and reviewed your financial information to determine how much they’re willing to lend you.
Getting preapproved is helpful because it gives you an idea of how much you can borrow and what interest rate you can expect to pay. It also shows sellers that you’re a serious buyer, which could give you an edge in a competitive housing market.
Apply for the loan
Once you’ve found the right loan and been preapproved, you can apply for the loan. The lender will then review your application and supporting documents to verify the information you provided.
If you’re approved, the lender will send you a loan estimate detailing the terms of the loan, including the interest rate, monthly payments, and closing costs.
Compare the loan estimate
Once you receive the loan estimate, you can compare it to the other offers you’ve received to make sure you’re getting the best deal.
You should also compare the fees associated with each loan. These can include origination fees, closing costs, and appraisal fees.
Choose a lender
Once you’ve compared the loan offers and chosen the one that’s right for you, you can select a lender and begin the process of getting your loan.
The lender will then order a home appraisal to determine the value of the property. Once the appraisal is complete, the lender will send you a loan commitment letter detailing the terms of the loan.
Close on the loan
Once you’ve received the loan commitment letter, you can schedule a closing date. This is when the loan will be finalized and the funds disbursed.
At closing, you’ll sign a number of documents, including the loan agreement, promissory note, and mortgage. You’ll also pay closing costs, which can include origination fees, appraisal fees, and title insurance.
Start making your payments
Once you’ve closed on the loan, you’ll start making your monthly payments. If you have a fixed-rate loan, your payments will remain the same for the life of the loan. If you have an adjustable-rate loan, your payments may change over time.
Refinancing your mortgage can be a great way to save money, but it’s important to do your homework and compare offers before you decide on a loan.
If you’re not sure where to start, our partners at Credible can help you compare rates and terms from multiple lenders in just a few minutes.