4 Things To Do If You’re Ready To Refinance

The country is experiencing a refinance boom and it is being driven by several different factors. One side effect of American consumers spending more time at home in response to the pandemic is that homeowners have begun to closely evaluate how well their home stacks up for their everyday needs. Increasingly, many homeowners have taken advantage of this unique situation to do renovations or upgrades that they may have been hesitant to move forward on before.

Additionally, low inventory levels in markets nationwide are forcing some to "love the one you're with" versus moving into a new home. Some homeowners simply want to take advantage of the historically low interest rates available to them today to free up capital and/or lower their monthly mortgage statements.

Regardless of your motivation to refinance, there are some steps that you and your family can take to help ensure that the process is as smooth as possible.

1. Know your home's true fair market value – While real estate sites can be great resources of information, keep in mind that the home value estimates that they post on their sites are just that – estimates. Many homeowners go into the refinance process thinking their property has a higher market value than it really does and later find themselves disappointed. Homeowners looking to refinance should also know their home's fair market value as reported by their local tax commissioner and the "sold" price of comparative properties (or "comps") in their area to get a more accurate idea of their home's value.
2. Prepare your home for the appraisal – Before your refinance loan can go through, the lender will want to conduct an appraisal of your property. Prior to the appraisal, homeowners should evaluate their home with a critical eye (or better yet, enlist a friend, neighbor or family member to do it). While it may not be feasible to replace the outdated cabinetry or light fixtures throughout the home, it is advisable to clean out gutters that may be seen as water damage risks, touch up paint inside and out where worn or chipped, pressure wash the outside of the home, trim shrubs and clean up overgrown landscaping, etc. All of these can help add dollars to your appraisal value.
3. Understanding your credit – Your credit scores and credit history are among the factors that may determine your loan terms, including interest rate. It's also important to maintain responsible credit behaviors (e.g. paying your bills on time, using a low percentage of available credit, paying off debts) before you start the refinance process. It's also important to ensure the information on your credit reports is accurate and complete. Through April 2021, consumers can receive one free credit report weekly from each of the three nationwide credit reporting agencies (CRAs) through AnnualCreditReport.com. Additionally, you can get a free monthly Equifax credit report and a free monthly VantageScore 3.0 credit score, based on Equifax data via Equifax Core Credit™(VantageScore is one of many types of credit scores).
4. Research Lenders – While some borrowers may prefer the simplified option of securing their refinance loan through their existing mortgage lender, different lenders may have different options available. In addition to rate, borrowers should also consider lenders based on factors including average time to close, customer experience, digital mortgage capabilities, customer service and ongoing support.