Here is a very simple list of steps to follow if you are thinking about refinancing your mortgage:
1. Think about pros and cons – You need to consider if you will really be saving money by refinancing. There are often closing costs associated with refinancing a mortgage. However, lowering your interest rate by a small percentage like .5% could save you hundreds of dollars each month. You should calculate you break even point or how long it would take you to recover the closing costs.
2. Prepare your paperwork – Some of the paperwork you will need includes your income tax statements, recent pay stubs, bank statements, other documents to prove your income, and your credit score. Lenders will want to see what your income to debt ratio is and also your credit history. A higher credit score will get you a better mortgage rate.
3. Shop around – You should do a lot of research to find the best possible rate. Look at different banks, both nationwide and regional and also approach mortgage brokers. Compare rates from different brokers keeping in mind that rates are constantly changing. Sometimes mortgage broker will give you rates with no closing costs. They can give you this deal because the rate is usually a little higher than usual. However, if this rate is still lower than your current mortgage rate, it doesn’t hurt to refinance at that new lower rate since it won’t cost you anything.