How to Refinance your Mortgage | Step by Step

The process of seeking your first mortgage can be a stressful one, and the day you close is often a time of great relief — both because the effort is over and because you’re soon to be the proud owner of a new home. For many home buyers, though, mortgages are all about compromise, especially for those with a less than flawless credit history. You may have to settle for a higher monthly payment or a variable interest rate, for example. The good news, though, is that you aren’t locked into those terms forever — there is always the chance for a future time when refinancing is the right option.

When your circumstances change, refinancing your mortgage can open many new doors. You could tap into built-up equity for a much-needed expenditure, convert to a fixed interest rate, or even lock in a lower rate and enjoy more money in your pocket every month. All of that comes only after you’ve practically navigated the entire process over again — so how do you make sure you can accomplish that goal? Use this step by step guide on how to refinance a home and start on the right foot.

 

1. Pull Your Credit Report and Know Your Score

Your credit score will play a significant role in determining the kinds of refinance rates available to you, along with how willing your lender of choice will be to take on refinancing your mortgage. Pull a copy of your credit report and examine it for anything unexpected while also checking your score. As a rule of thumb, your score should meet a minimum threshold of about 620 if you want to refinance — although a higher score will yield better rates. Does that mean you cannot refinance your mortgage with bad credit? No — but you will need to find a lender willing to work with some flexibility.

 

2. Figure Out Your Target Monthly Payment or Interest Rate

How much do you want to reduce your monthly payment? What type of interest rate would yield the best long-term prospects for your finances? These can be tough questions to answer, but it is important to figure them out in advance. This way, you can determine whether the rate offers you receive fall within your acceptable parameters. Using a refinance calculator can help to simplify this process. Plug in the appropriate numbers now and make adjustments until you find the right balance.

 

3. Investigate the Refinancing Suitable for Your Needs

Explore the variety of options available, as not every type of refinancing is the same. Some allow you to lower your payment, that’s true, but others can give you access to funds. For example, you may refinance to cash out the equity you’ve built up in your home over time. While this will set you further back on repaying the mortgage, it gives you quick access to liquid cash you can use for other important purposes — such as paying for a much-needed roof replacement on the property. 

 

4. Choose a Lender

With a sense of where you’re going and what you want to do when you refinance your mortgage, it’s time to partner with a financial institution. Sometimes, your original lender will work with you to refinance. In other cases, you may prefer to search for another option at better rates. At credit unions such as Resource One, for example, there is often wider latitude in working with clients towards an equitable rate than you might find in a major bank.

 

5. Gather the Necessary Paperwork and Information

What’s needed to refinance a mortgage? Your lender will need to examine a variety of financial documents to determine the type of offer they can make. It’s essential to keep these in order before applying, so gather up documents such as your pay stubs, W2s or 1099 tax forms, and prepare a statement of your debts and assets to allow your lender to have a close look at your current financial standing.

 

6. File Your Completed Application and Provide Additional Information As Needed

Proceed through the application process with your lender; usually a task accomplished in person. The formal application will then need to be evaluated by those in charge of the loan office. If further documentation is necessary, your lender should let you know what they need. After this stage, all that’s left to do is wait.

 

7. Close on Your Loan and Enjoy the Results

You will ultimately receive a loan offer, and if you decide that you can refinance at mortgage rates that are right for your home, you can agree to move on to closing. After signing a stack of paperwork and finalizing the details with your bank or credit union, you’re done! This long, arduous process is over, and you can breathe a sigh of relief. 

Explore Your Options and Lock In Excellent Refinance Rates with Resource One Credit Union

Whether you want to know more about how to refinance a house or you’re interested in finding your best option for better 30 year fixed mortgage rates, Resource One Credit Union is here to help. As a nonprofit focused on providing valuable services for all our members, we put your needs first in the pursuit of an excellent option for refinancing. Visit one of our locations for a conversation in person about your refinancing options, or give us a call first to set up an appointment in advance.