How to Get the Best Refinance Home Loan
- 1). Pull your credit report first. It's easy to get a copy of a credit report online for free. Look for late mortgage payments, late credit card and car payments, collection accounts, and any judgments. Any negative credit information will bring down a FICO credit score and will be a red flag to a mortgage company. To get the best refinance loan, make sure to clean up any negative information on your credit report before applying for a new mortgage.
- 2). To get the best refinance loan, know how much equity is in your house. Ask a real estate professional for comparable sales in the local area. Do some research online to find out what houses have sold for in the neighborhood. Do not look at sales over three months old. It's not necessary to know your house's exact value, but you should be able to get an idea. Once you know the value of the house subtract the balance of your existing mortgage. For example if a house is worth $500,000 and the current mortgage balance is $400,000, there is $100,000 worth of equity in the house. The equity in this house is 20 percent because $400,000 divided by $500,000 equals 80 percent and 100 percent minus 80 percent is 20 percent. It's important to have at least 20 percent equity in a house to get the best refinance home loan.
- 3). Make sure to have verifiable income to get the best refinance loan. Stated income mortgages are becoming a thing of the past since the sub-prime mortgage crises. Total monthly housing and debt payments should not exceed 30 percent of monthly gross income. Gross income is the amount of salary before taxes.
- 4). Make sure to shop around with brokers and lenders for the best refinance home loan. A mortgage may have a low interest rate, but the costs are excessive. Get a copy of the Good Faith Estimate and review it throughly. Costs should not exceed two percent of the mortgage. Many brokers and lenders try to hide fees; however, by law they are required to list all fees on the Good Faith Estimate. When signing the final paperwork, check the fees against the Good Faith Estimate. If there are any differences, ask the mortgage company for an explanation.
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