Refinancing your mortgage can save you a lot of money if done correctly. There are a number of costly mistakes homeowners make when refinancing that result in significantly overpaying for the new loan. Rolling your closing costs into your mortgage can be one such mistake. Here is mortgage refinance information and tips you need to consider before rolling closing costs in with the balance of your new mortgage loan.

Mortgage Refinance Information: Financing Your Closing Costs

If you are a homeowner without the necessary down payment to purchase your home, you can finance this amount with an 80/20 or piggyback loan. If you are using this type of financing to purchase your home, chances are you do not have cash on hand for the necessary closing costs. Many lenders offer the option of rolling these closing costs into your new mortgage balance. This is also true for homeonwers refinancing their mortgage loans.

Mortgage Refinance Information: Why You Might Not Want to Pay Closing Costs for the Next Thirty Years

When you roll your closing costs in with the loan principle, the mortgage lender will charge you a higher interest rate for the financing. This higher rate, along with the additional principle could raise your monthly payment amount by as much as $100. Over a period of just five years you will overpay $6,000 to the lender, just to save $3,000 at closing. Any advantage you gain from refinancing the mortgage evaporates the moment you agree to finance your closing costs.

Additional Mortgage Refinance Information

You can get more mortgage refinance information, including other costly mistakes to avoid by registering for a free mortgage guidebook.

If you are buying a home, you are going to need a home loan. So, what steps do you need to take before submitting your mortgage application?

Preparing for Submitting a Mortgage Application

At first glance, you may think a mortgage is simply a loan of money in exchange for a promise to pay. While this is true, another perspective is that a mortgage is a hedged bet. The mortgage lender is trying to determine what type of a risk you are, to wit, what is the likelihood you will repay the loan? The hedge, of course, is the fact the lender can take and resell your home if you default on the loan, but lenders do not like to do this. They are in the business of loaning money, not selling homes.

The number one thing you are going to need is documentation. The lender is going to analyze the risk associated with lending you money by looking at your recent and not so recent past. This process is known as underwriting in the mortgage industry. The underwriter will use various algorithms and benchmarks to approve or deny your loan application. Let’s take a closer look.

The first thing you are going to need for a mortgage application is documentation regarding your earnings history. The lender is typically going to want to see at least a two year history of steady earnings. The documentation is typically provided in the form of W-2 tax form from an employer. For self-employed individuals, the lender is typically going to want to see the last two years of your tax returns. You should also provide any and all documentation supporting other assets you might have such as mutual funds, stocks, bonds and so on.

Another area you should focus on is your credit. You don’t need any documentation per se as the lender will obtain your credit report, but this doesn’t mean you should sit back and relax. Prior to applying for any mortgage, you need to get copies of your credit reports. Take a close look at them. Contest anything that looks fishy. Even small changes to your credit can raise your credit score. The higher your credit score, the better.

If you are considering refinancing your mortgage but are unsure if taking out a new mortgage is a good idea with rising interest rates, there are a number of reasons to refinance regardless of the economy and save yourself money in the process. The best way to protect yourself from rising rates is to do your homework, research mortgage refinance information from a variety of lenders, and comparison shop for the best loan. Here is mortgage refinance information to help you decide if refinancing your mortgage is the right choice.

The majority of homeowners that refinance their mortgages do it to save money. There are several ways to save, regardless of interest rates. If you want to pay less to your lender in finance charges, the best way to save is by qualifying for a lower interest rate. If your financial situation has improved since taking out your original mortgage or interest rates are lower, you could qualify for a lower interest rate. Before you take the plunge and invest your time researching mortgage refinance information, you need to determine if refinancing is right for your situation. Here are several questions to help you determine if mortgage refinancing is right for you.

I. Mortgage Refinance Information: How Long Will You Keep Your Home?

If the possibility exists of moving in a year or two you may never recoup your expenses from refinancing the loan. The longer you plan on keeping your home, the longer you will have to realize savings and recoup your expenses. Recouping your expenses is just one aspect of refinancing; there are a number of costly mistakes that will keep you from the benefit of refinancing your mortgage. To learn how to avoid these costly mistakes register for a free mortgage refinance information guidebook.

II. Mortgage Refinance Information: Do You Have Pre-Payment Penalty?

Mortgage lenders often include penalties in their loan contracts for early termination of the loan. If you sell or refinance your existing mortgage and your loan has a pre-payment penalty, you could be required to pay up to six months worth of interest on 85% of the original loan balance to get out of your current mortgage.

III. Mortgage Refinance Information: How Much Will the New Mortgage Cost?

When you refinance your mortgage you will be required to pay many of the fees you paid when you took out the original loan. These fees could include origination fees, appraisal, survey, title search, points, insurance, and legal fees. Your closing costs alone could run as much as $3,000. These fees are why it is extremely important to research mortgage refinance information prior to applying for a new loan. Doing your homework will help you avoid costly mistakes.

If your financial situation is different today than when you financed your home or you need to free up cash in your budget for other reasons, refinancing your mortgage to lower the monthly payment could be your answer. There are a number to of things to consider when deciding if refinancing is beneficial; here is mortgage refinance information to help you decide if mortgage refinancing is right for you.

Mortgage Refinance Information: The Benefits

If you are homeowner with an adjustable rate mortgage that will adjust in a month or two, you might want to lock in a fixed interest rate before your payment goes up. If your financial situation and credit has improved since when you purchased the home, you might find that you qualify for a much better interest rate. If you just need the lowest payment possible there are ways to accomplish this even if your credit prevents you from qualifying for a better interest rate.

Mortgage Refinance Information: The Risk

There are always risks associated with refinancing your mortgage. After you refinance the loan you are starting from scratch with your loan’s amortization. This means the majority of your payment in the early months of the loan is paid directly to the lender in interest; mortgage loans are “front loaded” with interest and very little of your payment is applied to pay down the loan balance during this time. If you are lowering your monthly payment by extending the term, you will pay more over the course of the loan for this lower payment. This is fine if you plan on refinancing again later; however, if you keep this mortgage for a long period of time it will cost you significantly more.

Mortgage Refinance Information: Extend The Loan Term

Qualifying for a better interest rate to lower your monthly payment amount is a no-brainer; however, what if your credit prevents you from getting a better interest rate? You can still lower your monthly payment by choosing a mortgage with a longer term length. Term length is the amount of time your lender grants you to repay the loan. Common term lengths are 15 to 30 years; however, there are now 40 and 50 year mortgages that will give you the lowest payment amount possible. If you extend the term and qualify for a lower interest rate you will have an even lower payment amount.