When you borrow money to buy a house, you get a home loan. You can keep your loan until you pay it off, which might take 30 years, or refinance it at some point. If you have a clear purpose for refinancing your loan, you might want to go through with it. Many people do this to get a lower interest rate or to cut years off their mortgage. In any case, here are the main steps to go through if you want to refinance your loan.
Define Your Purpose
The first step is to define your purpose. Defining your purpose means deciding why you want to refinance, but this alone is not enough. You may also want to decide if your purpose is a good reason. Some reasons are good reasons to go through with it, while others might not be good reasons. The best reasons are to save money on your loan and to lower your interest rate. Another good reason is to take cash out of your equity, but there are other good ones, too.
Contact a Lender
The next step is to contact a mortgage lender that offers refinancing services. The purpose of this step is to learn more about the process and requirements. Your lender can tell you what they look for when processing applications, such as credit and financial state. Once you know these things, you can determine if you meet the criteria. You can also learn more about interest rates, loan options, and the steps needed to refinance. If you decide to go through with it, you can fill out the paperwork and move on to the next step.
Get an Appraisal
Most lenders ask for an appraisal before they close refinancing loans. An appraisal tells them how much money the house is worth, and they base the loan amount on this figure. They might agree to loan up to 80% of the home's value or a different amount. If your home appraises too low, it can jeopardize your chances of qualifying for the loan. If it appraises high enough and you meet all the other criteria, you can start working towards closing the loan.
Attend the Closing
At the closing appointment, you sign all the paperwork for the loan. On this day, the lender pays off your current mortgage and you leave with the new one. If you would like to learn more about the process, contact a lender today.Share