How do you refinance your mortgage?

Many homeowners end up refinancing their mortgage. When you refinance you basically get a new loan, ideally with more favorable terms, use it to pay off the old loan – you’ve refinanced!

Homeowners often refinance to lower them interest rateReduce their monthly payments or take cash out of their home (this is called a Cash-out refinancing) Some even refinance to get rid of it Private Mortgage Insurance (PMI) Or switch from an adjustable rate mortgage to a fixed rate.

Whatever the reason, the process is essentially the same. Below we will take a closer look at how Mortgage refinancing Works from start to finish.

If you’re thinking about refinancing your mortgage, start by answering a few quick questions here to determine your potential interest rate.

How do you refinance your mortgage?

Before plunging into a mortgage refinance, you first need to understand the process. Here’s how it works.

1. Check your credit

Before applying for a loan you should have a complete picture of your credit history and current status. This plays a big role in both your ability to qualify and the interest rate you are quoted.

For the best mortgage rates, you’ll want a credit score of 740 or higher. If yours isn’t quite there, you may still qualify (some home loans allow under 500), but just remember: you may not get the lowest advertised rate.

To improve your chances of getting a better mortgage refinance rate, reduce some of your debt, get current on bills or payments, or ask for a credit line increase — but don’t use it.

need Improve your credit score? Not even sure what your score is? You can get an Experian credit report and FICO score now by clicking here.

2. Set a goal

Determine the reason for you Mortgage refinancing. Are you hoping to lower your rate or monthly payment? Do you need cash for repairs or renovations? Do you want to get rid of private mortgage insurance or switch to a fixed rate loan? You need to know this before you apply with the lender. It will also consider the type of loan you need, as well as its tenure and other factors.

3. Apply to (and compare) several lenders

Next, choose at least three mortgage lenders and apply for a mortgage refinance loan with each. When choosing who to apply with, try to vary your options, including a bank or credit union, an online lender, and a big-name mortgage company. Once you apply, you’ll need to provide some information about your finances, as well as send documentation like tax returns, W-2s, bank statements, and more.

Within a few days (sometimes even hours), you’ll receive a loan estimate from each company you’ve applied with. These forms include loan offer interest rates, fees, Closing costs and other details, and you can use to compare one lender to another. Get a loan estimate from Quicken Loans here or use the table below to start comparing lenders.

4. Choose your lender and lock in your rate

Once you’ve decided which lender you’ll go with, you’ll need to lock in your rate. It basically guarantees your quoted refinancing rate for a certain period of time – usually 30 to 60 days – while your loan goes through the closing process.

5. Wait for your home appraisal

Your lender will usually order a home appraisal next. During this step, a third-party appraiser will inspect the property, assess its condition, and look at other comparable homes in the area. They will then give it an official appraisal value, which your lender will use to set your loan amount.

In some cases, you may not need an appraisal, although that is up to you Type of loan and lenders.

6. Close your debt

Finally, you’ll sign your papers, pay your closing costs, and close your loan. Sometimes, lenders let you finance your closing costs and roll them onto your loan balance. If this is the case with your loan, you may pay nothing at closing. You’ll instead pay those costs over time as part of your monthly payment.

The time is right for your refinance

It is important Time your refinancing carefully. If you refinance when the mortgage rate is much higher than your current loan, it can mean higher monthly payments and significantly more in the long run.

Additionally, refinancing comes with closing costs. You’ll want to make sure you stay home to make those costs worth it. If you think you might be moving out of the house soon, now might not be the best time to refinance.

If you are not sure Mortgage refinancing makes sense, talk to a loan officer. They can make personalized recommendations for your exact situation.

You can see exactly what you may qualify for with Rocket Mortgage by answering a few quick questions.