Getting Ready to Refinance: A Homeowner’s Prep Guide

Refinancing replaces your current mortgage with a new one. Done at the right time and for the right reasons, it can lower your payment, help you pay off your home sooner or give you access to cash for big goals. Like buying a home, though, refinancing goes more smoothly when you prepare ahead of time. Here is how to get ready.

Start With Your Why

Before you gather a single document, get clear on what you want the refinance to accomplish. Common goals include:

• Lowering your monthly payment by securing a lower rate or extending your term
• Paying off your loan faster by switching to a shorter term, such as 15 years
• Tapping equity through a cash-out refinance for renovations, education or debt consolidation
• Changing loan type, such as moving from an adjustable rate to a fixed rate, or from an FHA loan to a conventional loan to remove mortgage insurance

Your goal shapes which loan makes sense and whether refinancing is worth the closing costs. A good rule of thumb is to think about your break-even point: how long it will take for your monthly savings to cover what you pay to refinance. If you plan to move before then, it may not make sense.

Polish Your Credit

Your credit score plays a big role in the terms you are offered. A few weeks or months before you apply:

• Pull your credit reports and dispute any errors you find.
• Pay every bill on time, every time.
• Pay down credit card balances to lower your utilization.
• Hold off on opening new accounts or taking on new loans.

Even a modest improvement can help, depending on where your score sits.

Gather Your Paperwork

Lenders will verify your income, assets and existing debts. Having documents ready can speed up the process. Typical items include:

• Recent pay stubs and W-2s
• Federal tax returns, especially if you are self-employed or earn commission
• Bank and investment account statements
• Your most recent mortgage statement
• Your homeowners insurance declarations page
• Information on any HOA dues or second mortgages

Understand Your Home’s Value

Your equity, or the difference between your home’s value and your loan balance, affects which refinance options are available. It also determines how much cash you could take out and whether you may be able to drop mortgage insurance.

To get a rough idea of value, look at recent sales of similar homes nearby or ask a real estate agent for a comparative market analysis. Keep in mind that online estimates can be off. In most cases, the lender will order a professional appraisal as part of the process.

Get Your Home Appraisal-Ready

You cannot control the market, but you can make sure your home shows well:

1. Tackle small repairs like leaky faucets, broken fixtures or damaged trim.
2. Clean and declutter so the appraiser can see the home’s features clearly.
3. Tidy up the yard and exterior.
4. Make a list of upgrades you have made, such as a new roof, HVAC system or kitchen remodel, with approximate dates and costs.

Compare Your Options

Once you know your goals, credit picture and estimated equity, you are ready to compare offers. Look beyond the rate and review closing costs, lender fees and the loan term. Ask your loan officer to show the total cost over the time you expect to keep the loan. You can learn more on our refinance page, and if you mainly want to tap equity while keeping your current first mortgage, a home equity line of credit may be worth comparing.

Talk With FLO Mortgage

Every homeowner’s situation is different, and the right move depends on your numbers and plans. A FLO Mortgage loan officer can run the scenarios with you and help you decide whether refinancing makes sense. Contact us to get started.

This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.