When Considering Refinancing:
- Conduct some research. Learn what the trends are in your area (they differ from metro area to metro area) . Research some lenders and brokers and decide which might be best for you.
- Do a "break even analysis": compare how much your expenses will be with the amount of money you will save due to lower monthly payments and a lower interest rate. If you stay in your house after the "break even period", or however long it takes for you to recoup your losses, then you will save money refinancing. There are many calculators on the web nowadays that will help you weigh all the factors involved, including time, taxes, insurance, and all the applicable fees.
- Learn how to use an APR (annual percentage rate). It is designed to help you figure out what the true cost of the loan is so that the lender cannot, either intentionally or unintentionally, hide fees from you.
During the Loan Application Process :
- Avoid any program that tacks on a penalty for advance monthly payments.
- If choosing an ARM program, it might not be advantageous to pay discount points to buy down the interest rate. Instead, use the points to buy down the margin, that way you'll save money over the entire loan term.
- Remember that due to the Federal Truth in Lending Law, the lender must disclose all fees to you. Be sure and get the fees up front and in writing, in a Good Faith Estimate. This will clarify all closing costs, as well as lock down your interest rate- make sure to specify the time period of the lock.
- Be prompt with paperwork, as this will help your officer to process your documents faster.
- Read everything thoroughly. Do not rush through the process- ask questions, be aware, and keep in contact with your loan officer.
- Know the exact amount of money you will need to cover all the closing costs, as well as any extra information you might need.
- Be aware of how much money is in your escrow account.
- Remember that a lot of the closing fees are negotiable.