So you think you are ready to refinance….

Posted by  on May 30, 2014

You have been diligently monitoring mortgage rates, and running the information through a refinancing calculator. The numbers are nearly there -- if rates dip just a little lower, you think you will be ready to refinance.

Not so fast. There are a number of details that can delay -- or even derail -- your refinance. It is best to start taking care of these details before mortgage rates hit your refinancing target, because rates can move quickly. If you wait until rates are just right before you start the process, they may move out of your target range before you can act.

So, even before rates are where you want them to be, here are six things you should be looking into:

  1. Check your credit report. You may think you have done everything right, and have no problems. However, with information theft being so rampant these days, if you have not checked your credit report recently, you really have no idea where you stand. Looking into this early could give you time to clear up any problems before you miss a rate opportunity. Remember, even if you still qualify, a diminished credit record can affect the rate you get, and this may make the difference between refinancing being worthwhile or not.
  2. Verify with your current lender that your existing mortgage is fully up to date. Mistakes do happen, on the part of both borrowers and lenders. Perhaps you missed a payment without realizing it. Or maybe the lender's records are not quite up to date. Given how frequently loans get passed from the original lender to a different servicing firm, miscommunication can easily happen. Set the record straight before it hangs up your refinancing application.
  3. Make a list of your bank account numbers and balances. It seems like a simple enough matter. You can get this information off of any recent bank statement, right? Not necessarily. For security reasons, many banks do not put the full account number on their statements anymore. You may have to dig a little deeper to find the correct information, and any potential refinancing lender is going to want this kind of financial documentation.
  4. Get the right contact information for employment verification. Companies often have rules about who is allowed to give out employee information. The right contact might be someone in the human resources department rather than your direct boss. Make sure you know who the right person is before a misdirected call causes a potential lender to stall the process.
  5. Line up the cash necessary to pay various fees. The Federal Reserve estimates that the fees involved in refinancing can run into a few thousand dollars, and not all of them can simply be rolled into your new loan balance. Having cash on hand will help you take care of these processing expenses.
  6. Start to compare mortgage rates from different lenders. You may be monitoring the level of rates in general, but they can vary significantly from lender to lender. Getting one of the lowest mortgage rates can make the difference in whether or not refinancing makes sense. A little pre-shopping can guide you where to look for mortgage quotes when the time comes.

Remember, the reason to refinance may come down to the numbers, but the path to refinancing really comes down to the paperwork.

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