Mortgage Refinancing Tips to Make Applying Easier

There are many advantages to mortgage refinancing, when it is done correctly. Mortgage refinancing could qualify you for lower interest rates, reduce your monthly payment, even allow you to borrow against equity in your home. There are a number of costly mistakes homeowners make when mortgage refinancing that can delay approval and cost thousands of dollars. Here are several tips to help you through the process of mortgage refinancing.

I. Seek Pre-Approval Before Mortgage Refinancing

Shopping from a variety of mortgage lenders will ensure you find the best loan for your financial situation when mortgage refinancing. When you seek pre-approval from a lender make sure they are providing you the approval based on stated income and credit, and that they do not access your credit reports until you choose a lender.

When you compare loan offers it is important to compare all aspects of the loans you consider. Many homeowners make the mistake of assuming that if they choose the loan with the lowest interest rate they will save money. These homeowners frequently overpay for everything else including lender fees and closing costs.

II. Make Sure Your Original Mortgage Does Not Have a Penalty

Mortgage lenders often include penalties in their loan contracts to discourage refinancing. These prepayment penalties can be quite expensive and serve as a deterrent for mortgage refinancing. The average penalty lasts anywhere from six months to three years. Before you commit to refinancing your existing loan you should make sure you do not have to pay this penalty as it will negate any of the potential benefits you would receive from mortgage refinancing. Make sure the new lender does not include a prepayment penalty in your new mortgage loan.

III. Get Your Interest Rate Guarantee in Writing

Once you have decided on a lender and an interest rate, make sure the lender guarantees this interest rate. It is important to get the guarantee in writing and make sure the lender also guarantees the number of points you agreed to pay and what you receive for paying that fee. When you receive an interest rate guarantee from a retail mortgage lender or broker they will frequently mark this rate up. The wholesale mortgage lender has already qualified you for a specific interest rate, when the retail lender receives this interest rate they mark it up to receive an additional bonus. This markup by the retail mortgage company is called Yield Spread Premium. Homeowners that learn to recognize Yield Spread Premium can avoid paying this costly markup.

To learn more about mortgage refinancing while avoiding costly mistakes like paying Yield Spread Premium, register for a free mortgage guidebook.

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Posted in: Applying,Easier,Mortgage,Refinancing