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A home is usually a person’s biggest purchase and investment in their lifetime. Finding the right loan (because who can pay cash?!) is key to making wise financial decisions. Once you get a loan, the interest rate might not be fixed, or interest rates might decrease over time, so you want to consider getting a new loan or refinancing.
As with any loan application, start with your credit score. The higher (and better) your credit score, the better rates you will get. A higher credit score is earned mostly by paying your debt on time, having little or no debt, and having a low debt to earnings ratio. A credit score of 700 out of 850 is considered good.
You can get your credit report and score for free every 12 months, or monthly with on credit card statements.
How long will you stay in your home? The longer you stay in your home the more it is worth it for the costs.
Refinancing is not a free transaction. It can cost 2%-5% of your loan amount. The common fees for refinancing are application fee, originating fee, credit report fee, home appraisal fees, home inspection fee, flood certification fee, title search and insurance fee, recording fee, and reconveyance fee.
To make refinancing worth the effort, the standard is to be able to make back the cost in five years.
Like anything else, shop around and compare costs. You can also negotiate these costs, some lenders might be able to reduce or waive certain fees.
A “no-cost” loan doesn’t mean it is free but rather it has its fees folded into the life of the loan, or a higher interest rate, which could be more costly over time. It is a good choice if you don’t have the out-of-pocket fees.
As with any loan application, start with your credit score. The higher (and better) your credit score, the best rates you will get. A higher credit score is earned mostly by paying your debt on time, having little or no debt and having a low debt to earnings ratio.
Tags: loan, refinance