5 Questions to Ask Before Refinancing Your Mortgage
Refinancing your mortgage is a beneficial option for a homeowner, but there are a few things you should know before making the decision to refinance. Here are some questions to ask yourself if you’re considering refinancing your mortgage.
What are my goals for refinancing my mortgage?
Do you want to get cash out, lower your rate or payment, decrease the loan term, or even pay off other debts with the funds you receive from the refinance? Knowing your end goal will help you choose which refinance type is best for your individual situation.
Is now the right time to refinance my mortgage?
Most refinances are based on the home’s equity. Equity is the difference between how much you owe on the home and how much it is worth based on the market in the area. If you owe more on your home than it is worth, it might not be the right time to refinance your mortgage.
Do I qualify for a refinance based on my credit score?
VeteransLoans.com requires a FICO® credit score of 620 to qualify for most of the loan products we offer. Also, the higher your credit score, the lower your rate will be. Knowing what your credit score is and what is on your credit report is an advantage that can help you gauge if now is a good time to refinance. You are legally entitled to one free credit report each year, which you can access at AnnualCreditReport.com.
How much will it cost to refinance my mortgage?
Shop lenders to make sure you are getting the most competitive rate. Make sure there is enough equity in your home that you can roll the costs of refinancing into the new mortgage without having to bring cash to closing.
Do I have enough room in my budget to refinance?
Your lender will evaluate your monthly expenses compared to your income. This ratio is your Debt to Income (DTI). If your DTI is too high, you may not qualify for the refinance. Paying down debt can be a strategic move if a big chunk of your monthly income is used to pay off credit accounts.
If you answered all of the above questions and still don’t know if it is the right time to refinance your mortgage, contact a loan specialist at VeteransLoans.com today to talk with a loan specialist!