[vc_row][vc_column][vc_column_text]This certainly is one of the best times to refinance â€” Are you prepared?[/vc_column_text][vc_column_text]Given the current market conditions, many people are taking advantage of low rates and saving large amounts of money on their home mortgage loans. However, when borrowers donâ€™t have strong financial guidance, they can make many mistakes that can cost them money, time and even their house. The good news is that these mistakes can be avoided!
So, what mistakes may you avoid?[/vc_column_text][vc_column_text]
1. Hesitating to lock in low rates
The financial market can fluctuate in unexpected ways. Mortgage interest rates may have dropped in the past three or four weeks and because of it, borrowers tend to believe that these incredible low interest rates might get even lower. And, they could some times, but they also can increase, hurting your monthly installments and making you pay higher amounts of money.
The risk is very high, rates can go up within in hours, so it is always a wise financial decision to take advantage of the lowest rate that already found in the market and lock it. If interest rates fall after you close, you can always refinance – but at least you’ve locked in a great interest rate, and itâ€™s better than not locking it and later facing potentially higher rates.
2. Consulting different financial experts is fine, consulting too many is not
It is important to do your homework and find the best lenders that could give you the best loan options. However, when you have too many applications with different lenders, youâ€™ll also have many inquiries on your credit score, which will hurt your rate.
To reduce this risk, but at the same time to be certain that your lender is your best option, you might also want to try with different free tools that can help you to get a customized rate. For example, you can always look free online mortgage calculators and websites that estimate your rate.
3. Changing your job while applying for a mortgage
Changing your job in the middle of your home loan process could affect your loan. The lender always looks for low risk candidates that have a strong financial and stability to respond to the monthly installments. Generally speaking, if you immediately switch from one job to another within your same field and get equal or higher pay, you wonâ€™t have problems. Otherwise, the best option is to try to delay the change until you get approved.
However, all the scenarios are different and it is not always possible to delay this process. Taking a new job wonâ€™t automatically disqualify you from getting a mortgage, itâ€™s just that you may face a harder time getting your loan approved.
4. Taking too long time to collect the documents
Taking longer to submit your loan documents could generate late fees and delays in the approval of your loan. Lenders need a list of your financial and mortgage documents such as tax returns, paystubs and bank statements to evaluate your mortgage potential. Sometimes borrowers prefer to lock in their rates upfront and then work on the documentation and submission. However, taking too long may result in your rate expiring which will cost you extension fees and also if youâ€™re refinancing to lower your payment, the longer you take, the longer you will continue making your current higher payment. All of which is money coming out of your pocket that could be avoided.
5. Overvaluing your home
The value of your house will determine the amount and terms of your new loan. Since you originally bought your home, your home value has most likely increased. So you may find a lift in the price of your house. But how can you find this complex number? It depends in many factors, for example, have you added extra rooms? Did you install new flooring? Carpeting? or Remodel? Many homeowners assume their home value is much higher because of personal or emotional attachments to their homes, but the actual market value may not reflect that.
To avoid this risk, you can always contact a lender that could help you by using different formulas for what changes do to the value of a home. Often these numbers are thousands of dollars higher or lower. You can always use a licensed appraiser or appraisal service to determine the value of your home, in relation to the neighborhood, and taking into account any changes youâ€™ve made.
Refinance gives you many options to have a better deal with your loan, saving you money and time. Did you know under certain circumstances, the lender can actually help by paying your closing costs! If refinancing is the right option for your, donâ€™t hesitate to get in touch with your lender.