While interest rates may be slowly on the rise, many homeowner’s can still lower their monthly payments. To ensure you’re a refinance success story, avoid some common mistakes:
1. Jumping at what looks like a great deal. Locking in a lower rate can mean you pay much less over time for your home, but it only makes sense to refinance if it works out that way for you.
Mortgage interest rates are dropping now that we’re into homebuying season. But they have risen about a percentage point from their low last year. Many people fear rates will begin rising, and this can instill a feeling of panic and an urgency to act.
While you may want to look into a refinance sooner rather than later, you shouldn’t feel pressured to refinance until you crunch the numbers and make sure it’s worth it for you. But by the same token, don’t dither around too much that you lose a good rate. Know what the expiration date is on your loan lock.
2. Sticking With Your Current Bank. The bank that holds your current mortgage may end up being the best option for your refinance. Or it may not. A certified loan officer will be able to search multiple lenders for you, and they’ll only pull your credit report once. If you went to multiple banks and they each pulled your credit report, you’d start to get lower scores which won’t help you get a good rate. Talk with someone who can help you find the best loan for you.
3. Overlooking Closing Costs. Just like when you got your original mortgage, you will have to pay closing costs for your refinance. A refinanced loan will have many of the same closing costs as that original loan, like loan origination fee, loan application fee, appraisal fees, title fees and attorney’s fees.
It can add up to 3% to the cost of the loan. It’s important to factor in the closing costs when you are determining if a refinance will save you money in the long run.
4. Not checking your credit report first. You don’t want to have any surprises going in. Plus, in order to get the best rate possible, you should have been monitoring and correcting mistakes for six months prior. It can sometimes take three or more months to repair a mistake in your credit report.
5. Being unrealistic about your home value. You can only borrow based on the appraised value. If you believe your home is worth more, then talk with the appraiser. Also, make sure you boost your curb appeal before the appraiser arrives. Also, don’t start a renovation before you get the home appraised. You don’t want your house to be all torn up when they do their walk-through.