Steps To Refinancing Your Conventional Mortgage

There are many options for borrowers who want to refinance a conventional mortgage.

If you want to refinance, you can choose conventional-to-conventional refinancing, conventional-to-FHA, and for qualified veterans and currently serving military members, conventional-to-VA refinancing.

Regardless of which route you choose, there are some common ways to prepare for your refinancing loan application that apply to all of the choices listed above.

Evaluate The Options

Take stock of the choices you currently have. Are you currently in a fixed-rate home loan or an adjustable rate mortgage? Your financial goals play a big part in making the right choices for a refinancing loan. Some borrowers want to pay off their home loans as quickly as possible and choose a refinancing loan with a 15-year payoff. Others want to lower their monthly payments and choose a 30-year loan. When you refinance for a 30-year loan you may have to wait longer to pay off the property, but the trade-offs are worth it for many borrowers.

Double-Check Your Credit

First time home buyers soon learn that purchasing a home, regardless of the type of home loan such as a conventional mortgage, VA or FHA guaranteed loan, requires a close look at credit scores and payment behaviors. If you haven’t checked your credit score since the first time you applied for a home loan, now is a very good time to do so. Make sure your credit report is free from errors, has up-to-date information, and shows no evidence of identity theft.

Make On-Time Payments

A good payment history is crucial when it comes to getting the best rates and terms for refinancing a conventional mortgage. Many financial experts recommend your record showing at least 12 months of on-time payments before applying for a refinancing loan. In addition, some advise paying down your open lines of credit as much as possible (down to 30% of the limit according to some advice) before applying. Your potential debt could be as much of a liability as current debt in the eyes of some--how many open lines of credit do you currently have?

Shop Around

Some borrowers never think to look beyond their current lender when planning to refinance a conventional home loan. Have you explored your options outside your current financial institution? You may find more competitive rates and terms by getting pre-approved or filling out online application data with other companies. Don’t hesitate to shop for home loan refinancing the same way you’d shop for an automobile--compare the terms and rates offered by several lenders and you’ll be a much more informed borrower.

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