Business & Finance mortgage

How to Refinance a New Home

    • 1). Determine the estimated value of your home. Do not rely upon a previous appraisal, regardless of its age. You want an updated value. You can order a full appraisal (between $200 and $500), but you can also get a free, estimated value online from Zillow.com. In addition, you can access recent, comparable properties sold in your area from MLS.com.

    • 2). Calculate the loan-to-value (LTV) on your current mortgage. For example, say your home is worth $175,000. Your current mortgage is $160,000, but you want to take $10,000 cash out. Your new loan will be $165,000. To determine your LTV, divide your mortgage balance by the value of your home. In this example, your LTV would be 94 percent.

    • 3). Pull your credit report. You can get a free copy at AnnualCreditReport.com. You can also get a copy of your FICO score online, which will cost you $5. A FICO score is a three-digit number between 300 and 850. Excellent scores are above 720. A good FICO score is 660 or higher.

    • 4). Research lenders based on your credit. If you have minimal equity, your best bet might be a mortgage broker. Small banks and credit unions cater to well qualified customers. Mortgage brokers have more flexibility since they often work with as many as 100 lenders at a time.

    • 5). Submit two or three refinance applications. Too many applications could damage your credit score. Compare all refinance offers side-by-side. Any offer you choose must have a tangible benefit. This could include cash out, monthly payment reduction or interest rate reduction.

    • 6). Give your loan officer your existing mortgage documents, your income documents and copies of your property tax bill. This will help the underwriting department quickly pre-approve your loan. Make sure the terms on the refinance are what you agreed to initially before signing off on the final approval.

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