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Tips on refinancing your home

Here's what you need to know before refinancing your home.

The Federal Housing Finance Agency has begun charging a 0.5% "adverse market" fee on most mortgage refinances.
The Federal Housing Finance Agency has begun charging a 0.5% "adverse market" fee on most mortgage refinances.Read more/ MCT
    by Michele Lerner, The Washington Post
    Published 

Consult a lender to review your options. Switching a loan term to 10 or 20 years instead of just 15 or 30 could improve your financial situation.

Prepare your paperwork. Gather your pay stubs and bank statements physically or digitally to speed up your application process.

Shop around. Contact your current lender and one or two others on the same day for an accurate comparison.

Negotiate. If you find a better rate, you ask another lender or your current lender to match it.

Raise your credit score. Interest rates on conventional loans are tiered according to your FICO score, with the lowest mortgage rates reserved for borrowers with the highest credit scores. Even a small increase in your FICO score could move you to the next level and save on your rate.

Reduce your debt. A lower debt-to-income ratio, which compares your minimum payment on all debt with your gross monthly income, may make the difference between qualifying for a loan or not, but it doesn’t directly impact your mortgage rate. Generally, lenders prefer a debt-to-income ratio of 36% or less, but most loans require a ratio of 43% or less. Some lenders and loan programs allow a higher debt-to-income ratio.