Steps to Refinancing Your Home
I’ve always thought that the best way to learn a new process is to take it one step at a time. And when it comes to a process like home mortgage refinance (where there’s a lot of money involved), it’s even more important to learn the steps involved.
So what are the steps to refinancing a home mortgage? Well, if you ask 20 different mortgage folks this question, you’ll probably get 20 variations on a theme. In truth, you could start with a number of different steps to achieve the same end result. But let’s keep things simple, shall we.
Here is a good overview of the steps to refinancing your home loan. While you may not go through the process in this exact manner, it will at least give you a better understanding of what to expect.
Home Mortgage Refinance - Step by Step
- Step 1 - Review your credit reports and scores. For many people, the point of refinancing a home mortgage is to take advantage of lower interest rates. The market will partly determine what rate you get on the new loan, but your credit score plays a major role as well. You can start this important step by visiting the Tools section of this blog.
- Step 2 - Choose a home mortgage refinance lender. Some lenders only offer financing for the purchase of a home. Some lenders provide refinance loans and regular home loans as well. Other lenders specialize in mortgage refinance services. My advice is to go with a trusted name in this industry, which is why we recommend LendingTree (see link above). Learn more about the important step of choosing a lender.
- Step 3 - Get quotes and estimated closings costs from your chosen lender(s). Before you take any further steps in the refinancing process, you must determine if a mortgage refi even makes sense in your current financial situation. To do that, you’ll need to know what kind of interest rates a lender is willing to offer you, as well as an estimate of the closing costs on the refinance loan.
- Step 4 - Determine your break-even point (BEP). This is one of the most important steps to refinancing a home mortgage loan, because it will help you determine if you should pursue a refi in the first place. In some situations, it doesn’t make sense to refinance because the amount paid (in closing costs) will exceed the amount saved (from the lower rate). Learn more about the break even point.
Is this a simplified version of the process? Of course it is. Are there more refinancing steps than those listed above? Sure there are. In fact, entire books have been written about the refinance process, and the many steps involved with it. But that’s not the point of this blog post.
The point here is simply to get you thinking about the key steps to a mortgage refinance — checking your credit, shopping for a lender, obtaining quotes, and determining your break-even point and potential savings. Good luck with your refinancing process!