You might’ve bought your house when it was a buyers’ market and you were able to put at least 20% down. As a result, your mortgage interest rate could’ve been extremely low at that time. Since then, you might have gotten a raise, improved your credit and paid off two or three car loans. Now is a good time to compare what you’re paying with the most current refinance rates. Shaving as little as one percentage point off your mortgage could make your monthly payments go down tremendously. You only want to refinance your mortgage when you’re certain that your financial status has greatly improved. Here are a few clues that will tell you if you’re ready to refinance that mortgage once and for all.
Run Your Credit Scores
Credit isn’t everything when you’re attempting to refinance a mortgage, but it is one of the top three criteria that lenders consider. You will want to wait to refinance if your credit has recently dropped below a score of 700. In fact, you may want to wait until you have at least a solid 750 credit score to start running refinance mortgage loan applications. It is really easy nowadays to monitor your credit online, so keep checking your scores periodically until they hit the mark.
Put Out Some Feelers
Applying for a refinance mortgage can help you pay less on your mortgage every month, but it can also lead to old debts coming back to haunt you. Remember that every time that you apply for financial products such as car loans and mortgages, these inquiries are placed on your credit report. Any creditor with access to your credit report can see that you’re shopping around for mortgage refinance loans and it will suddenly add a new negative trendline that brings your scores down until they’re super low. To help combat this, apply for a refinance loan at least six months before you actually plan on refinancing. This will help you to see if there are any debts that you forgot to pay without being surprised just before you can sign on your new loan.
Look at Current Interest Rate Trends
It’s a really good time to refinance a mortgage when the U.S. Federal Reserve lowers interest rates. This enables banks and lenders to offer better deals to borrowers. Remember to be thorough and forthright about your income and financial obligations on your mortgage application, as lenders will suspect fraud and deny you outright if there are too many inconsistencies. Pay attention to interest rates and see when the Federal Reserve is expected to increase interest rates so that you can lock yours in and get a better bargain when you refinance your mortgage loan.
When you’ve got a great credit score, a solid work history, and you’re not carrying a lot of debt you should look to refinance your mortgage. Sometimes, it is also good to apply for a mortgage refinance when interest rates with the Federal Reserve are at an all-time low. Don’t neglect your credit just because you’re a proud homeowner and you’ll be able to enjoy lower and lower mortgage payments.