You may have questions about refinancing your house. The good news for anyone who has already been through the mortgage process to purchase the house they want to refinance is that the two processes are very similar. However, that doesn't necessarily mean that anyone who owns a home is automatically prepared to refinance. This article covers the basics steps of the refinancing process.
For the average person looking to refinance a home, the biggest factor is the current interest rate versus the rate they locked in when they bought their home. If rates are lower today than they were on closing day, it's possible to save money by refinancing. However, some people who are refinancing in order to get rid of PMI could come out on top even if rates are either stagnant or slightly higher compared to when they purchased their homes. This is where sitting down with a lender to crunch the numbers becomes important. Credit score is another major factor in the decision to refinance a home. As most people know, interest rates fluctuate based on a mix of market forces and decisions from the Federal Reserve. However, a person's credit score can determine whether they get offered rates on the higher or lower side of the current market average. Has your credit score improved significantly since you closed on your current mortgage? It might be worth seeing if you can be approved for a lower rate. For borrowers who are interested in a cash-out refinance, knowing how much equity is in your home is important. Generally, 20% equity is required to be approved for a home refinancing. It's also important to know the fine print of your mortgage. In mortgages with prepayment penalties, fees may kick in for homeowners who refinance within three years of closing.