What to Do Before Refinancing
Remember, it’s better to take longer to prepare for your refinance if you need to in order to fix things like payment history (a recommended 12 months of on-time payments for all bills) or correct identity theft issues on a credit report.
It’s best to give yourself as much time as needed to prepare before filling out paperwork on your refinance loan-anything that increases your chances at loan approval is a good thing.
Examine Your Payment Record
Look at those last 12 months of payments on your financial obligations. You may need to delay your loan application by a month or two if there is still a late or missed payment on the books from the most recent 12 months (not necessarily the actual calendar year).
Don’t let that late or missed payment jeopardize your chances at loan approval.
Examine Your Home Loan Payment Record
You will want to do this for the reasons we just mentioned above, but also because some FHA refinance loans will require a minimum of six mortgage payments before the loan can be refinanced. How many payments into your existing mortgage are you?
Know before you apply. The number of payments can affect both whether or not you are eligible for the new loan, and how much equity is built up in your home at application time.
Examine Your Housing Market
If you already have a mortgage, what’s the point in examining the housing market ahead of your refinance loan?
If you are applying for an appraisal-required FHA refinance (and most refi loans will require an appraisal), the lender will use the appraisal to give the home a fair market value based on existing conditions rather than the standards used to originally approve your loan.
This is quite helpful for those who live in rising housing market with increasing property values-you may find the value of your home in the up phase of the market cycle has increased more than you realize.
Also, for appraisal-required refi loans, you cannot use the old appraisal according to FHA loan rules. Once the transaction has finalized your home cannot reuse the old appraisal. Any time a new FHA loan case number is involved you should generally expect a new appraisal.
Talk to a loan officer about these issues if you need further clarification; don’t sign a legally binding agreement such as a home loan contract if you still need portions of the transaction explained to you. Know before you sign!
Sometimes It Pays to Refinance
Don't Forget Your Closing Checklist
Monthly Payments Establish Good Credit
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