Refinancing Dos and Donts

DOS

DO pay your bills on time. There is no single element that can so dramatically impact the success of an application and be a key determinant of your interest rate than your credit history.

DO obtain a current copy of your credit report. There are many online sources for obtaining credit reports. 

DO gather any documents that may be required to provide income or debt verification during the loan process. This includes paycheck stubs, W2’s, bank statements and home insurance certificates.

DO ask your present lender what cost savings they offer to existing customers who refinance with them.

DO s hop around to find both a loan officer and loan fees that meet your criteria.  If you are going to apply for a refinance with several lenders, you should do so within a 30-day period. Too many inquiries on your credit can significantly lower your score.

DO shop mortgage rates in your local market to know the current competitive rate and to ensure you are getting the best deal for your situation.

DO evaluate the cost of refinancing with the cost of your existing loans. Federal "Truth in Lending" laws require that lenders give you certain uniform disclosures containing the annual interest rate you are charged, the total finance charge, the amount financed, and other costs. You must consider all costs involved in refinancing to make an accurate comparison when choosing a lender. Don't just compare interest rates. Compare all costs.

DO remind the lender that they are required by Federal Law to provide a Truth in Lending Statement and a Good Faith Estimate within three business days of making application for the mortgage.

DONT'S

DON'T refinance for small gains. Refinancing costs money and even more if you have a prepayment penalty. It would be counter productive to pay thousands in closing costs to lower your monthly payments by a few dollars.

DON'T believe "no closing costs". If they are advertising no closing costs it is likely that they make their profits with higher interest rates. Watch out for refinancing "scams." If an offer sounds too good to be true, it probably is.

DON'T dismiss an adjustable rate if you know you'll move within a couple of years or a fixed rate if you intend to stay in your home for 5 or more years.

DON'T be pressured or forced to close before you completely understand the proposed mortgage fees and terms.

DON'T refinance your home for more than its market value without weighing the risks. Lenders that offer loans exceeding your home's value charge much higher interest rates than standard mortgage lenders. In addition, you may not be able to deduct some of the interest that you are paying on such a loan.

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