Mortgage rates are still relatively low. That means that thereâs no time like the present to consider refinancing the mortgage loan you have for your home. Shaving at least a point or two off your current rate or converting your 30-year loan to a shorter 15-year term can help you keep more of your money in your pocket and out of the hands of lenders.
Before you go looking for a refinance loan, itâs a good idea to polish up your application package to make yourself as appealing as possible to lenders. SmartAsset has put together a quick checklist of things you need to do that can up your odds of getting your new home loan approved.
1. Track Down All Your Documents
Refinancing your home usually involves just as much paperwork as your original mortgage loan required. So getting your ducks in a row ahead of time can make the process a bit easier. Youâll likely need proof of income from your pay stubs for the past few pay periods and copies of your tax return for the last two years. If youâre receiving any child support or alimony payments, itâs also a good idea to have receipts or canceled checks on hand to show the sources of that income.
Next, youâll need to gather up recent statements from your bank and investment accounts as proof of your assets. Lenders often check your account history from the past two years, so itâs best if you hold off on making any big withdrawals or deposits in the months leading up to your refinance application. If you do have any unusual banking activity, be prepared to explain it to the lender with documents to support your claims.
2. Take a Look at Your Credit
Lenders want to see that youâve got enough income to cover your monthly payments after you refinance, but theyâll also be concerned with your credit score. If itâs been a while since you checked it, thereâs no reason to put it off any longer.
There are plenty of ways to check your score without paying anything. You can get free copies of your credit report from each of the three reporting bureaus through AnnualCreditReport.com. Also, a number of credit cards now offer complimentary FICO scores to card members. You can also get a look at your credit score from SmartAsset.
3. Find Out What Your Home Is Worth
Unless youâre applying for an FHA Streamline Refinance, youâll need to have an accurate estimate of what your homeâs value is before applying for a new mortgage loan. The bank must have enough information to decide how much of a loan youâre eligible for. If the appraisal value comes in too low, you may not qualify for a refinance at all. Thatâs something you want to know before you get too far along in the application process.
Doing a little homework before you enlist the help of a professional can give you an idea of whether itâs worth it to shell out several hundreds of dollars for an appraisal. From there, you can compare your homeâs value to the sale prices of similar homes to determine what ballpark youâre working with.
If you want more help with this decision and others relating to your financial health, you might want to consider hiring a financial advisor. Finding the right financial advisor that fits your needs doesnât have to be hard. SmartAssetâs free tool matches you with top financial advisors in your area in 5 minutes. If youâre ready to be matched with local advisors that will help you achieve your financial goals, get started now.
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