With homeowners salivating over falling mortgage rates, now is the time to consider mortgage refinance. With an unsettled Middle East and the tragedy in Japan, U.S. interest rates have taken a nose-dive back into the high 4% range. As of the week of March 23, 2011, a 30 year fixed mortgage loan rate hovered at 4.76% after consumers saw rates tip the 5% mark toward the first of the year.
However, this week’s news may be a signal to homeowners that its time to hop on the mortgage refinance train before it leaves the station. As of Monday, March 28, 2011, rates rose slightly to 4.82% (30 year fixed mortgage), which may reflect rumors that the Fed may end Treasury note purchases one month earlier than its June deadline. The cessation of government financial backing signals a positive uptick in the nation’s economy.
In the coming months, homeowners should explore the possibility that they may be sitting on hundreds, if not thousands of dollars of savings, if they pursue mortgage refinance now. Of course no financial deal should be entered into lightly and homeowners must perform due diligence before determining if a mortgage refinance is the right financial move.
Smart Mortgage Refinance Tips:
Like applying for a first mortgage, mortgage refinance involves similar steps and documentation. Homeowners should consider every aspect of mortgage refinance before going forward:
- Explore your credit rating. With mortgage refinance, your goal is to find savings with your monthly mortgage payments in the long run. However, if your credit score is too low, you may not see significant, if any savings.
Before you throw up your hands in surrender, scrutinize every line item on your credit report. Just because the figures are written in black and white, it doesn’t mean they are completely accurate. Often consumers find inaccuracies that make a tremendous differences. Areas to examine include debt payment timeline, income, assets, property sales and purchases and bankruptcies or foreclosures. Sometimes someone else’s credit information can be reported to your name so make sure every item pertains to your financial actions.
- Conduct an appraisal. If you are upside down in your mortgage (if your property is worth less than what you owe), that may take you out of the mortgage refinance running. Check home sales on the multiple listing service (MLS) for comparable properties in your area or neighborhood. If comparable homes are going for less than what you owe, it may not be worth your while.
- Establish a financial mortgage refinance plan. Consider why you are refinancing. Mortgage refinances come in different packages so depending on how long you plan to stay in your home or that state of your current mortgage, determine what you will receive from the refinance.
One of the best ways to arrive at solid financial figures is to use a mortgage refinance calculator. Based on your goals, use the mortgage calculator to decide which program is best for you -- a shorter payoff period, locked-in fixed rate and how closing costs will influence your decision.
- Interview a variety of mortgage brokers. Every mortgage broker brings something different to the table. Some mortgage brokers are more flexible than others, whereas some may not be as flexible but have rock-bottom rates.
Rule of thumb is to interview at least three or four different mortgage brokers before making a decision. During your interview ask about rate or closing cost discounts for adding products through the mortgage company. Another question to ask is about discounts for making mortgage loan payments electronically. Additionally, ask your mortgage broker if the company participates in secondary mortgage loan market sales. If local service is important to you and the mortgage broker sells the loan, you may want to consider a different lender.
- Dig out home and mortgage documentation. Just like the first time around, you will need to furnish the same information you used to obtain the first mortgage for your refinance. Items you’ll need include two year’s worth of W-2’s, tax returns, up to three months worth of bank statements, any other asset statements, paycheck stubs and any other documentation that demonstrates income or support (such as child support or alimony).
Your mortgage broker will also order an appraisal so having your property survey on-hand in addition to any upgrade (such as an addition or a pool) documentation will be helpful. Be sure you identify any and all upgrades to the appraiser as it can help your overall value.
Homeowners should practice patience and approach mortgage refinance with a clear head. If rates inch up during the coming weeks, it’s important to remember that they are still historically low, which may still produce an enormous savings.
Also, maintain clear communication with your mortgage broker and ask questions during the process, so you can proceed with eyes wide open.