Do You Want the Best Possible Refinance Interest Rate? Follow These Tips
With historically low-interest rates, some banks or so overwhelmed with refinancing applications that they have stopped accepting them. However, just because there are very low rates available does not mean that you will be eligible for these low rates. If you want to see the lowest possible interest rate when you refinance, follow these tips. At Neighborhood Escrow, we have seen many buyers through the process and know exactly what gets the best rates. We also suggest you check out these resources for more information.
Increase the Equity in Your Home
One of the key elements to getting approved for a good refinance rate is your loan-to-value ratio (LTV). This refers to the amount of the loan you are requesting and the value of your home. Lenders generally consider a lower LTV borrower to be less risky. You increase the equity in your home (and thereby decrease the LTV) by paying down your mortgage, making improvements that increase the value of your home, or by waiting for homes to sell in your neighborhood to show increases in value.
Boost Your Credit Score
Generally speaking, a person who has a credit score of 740 or more will get the best interest rates. If your score is lower than 620, you are much less likely to qualify for a refinance at all. To raise your credit score, pay your bills on time, try to keep your credit card balance low, and do not apply for credit that involves a hard pull on your credit report.
You can also request a copy of your credit report from all three credit reporting agencies: Experian, Transunion, and Equifax. Make sure that they do not include mistakes. If you do see mistakes, take the necessary steps to dispute them.
Pay Your Closing Costs Upfront
Depending on numerous factors, your closing costs could be considerable. In some cases, they could be more than 2% of the loan. In most cases, applicants will roll those new costs into the loan. It is true that these zero-cost mortgages might save some out-of-pocket money, but they can result in higher interest rates. If you are able to pay these in cash, do so. Not only will it lower your interest rate, but it will lower your monthly payments too.
Ask Your Lender What You Can Do
Gone are the days when you could walk into a bank, shake a lender’s hand, and negotiate or convince them to lower your interest rate. However, you can have an honest conversation about what steps you can take that would lower your interest rate. Learn how to lower fees, reduce your mortgage payment, and more.
