Gather the Required Documents

• Gathering the required documentation before starting an application can streamline the refinancing process. Lenders usually require proof of income (such as recent pay stubs), three months of bank statements and a list of current debt obligations
  
  A lender may also request a copy of retirement account statements, such as 401(k) accounts, to determine your total assets. If you own rental property, the lender will likely request current rental agreements.
  
  

Understand Types of Mortgages

• When shopping for a new mortgage, determine your priorities. For example, do you want to lower your monthly payment or pay off your loan in 15 years instead of 30 years? Deciding your goals before contacting the lender will help the lender find the right mortgage product.
  
  Also, decide if you want a fixed-rate mortgage or an adjustable-rate mortgage. Adjustable-rate mortgages may offer a low introductory rate, but after the agreed period (like five years), the payment could significantly jump.
  
  If you plan on selling your home before the promotional period is over, an adjustable-rate mortgage can be a good way to lower monthly payments.
  
  A fixed-rate mortgage provides more stability in your monthly payments. The homeowner pays a fixed amount each month for the life of the loan; no surprises.
  
  

Decide if You Want to Purchase Points

• Points, also called origination fees, allow you to "buy down" your interest rate. For example, if you buy down a 7 percent interest rate one point, your interest rate will be 6 percent for the life of the loan. However, buying points costs money.
  
  Decide if buying points is right by finding the break even point. For example, if you save $100 a month on your payment and buying one point costs $1,200, it will take 12 months to break even. If you plan on staying in your home for longer then 12 months, it's worth it.
  
  Compare mortgage rates with tools such as those at bankrate.com, which allow you to compare mortgage rates on fixed and adjustable mortgages for lenders in your area.