Tuesday, November 29

Refinancing Your Mortgage Loan: Things You Should Know Before You Do So!

For many homeowners, the low mortgage interest rates might incentivize them so that they can restructure their finances. But the decision to refinance the mortgage loan should only be made according to personal financial situations. The mortgage rates should be your deciding factor in whether you must refinance or not.

By keeping that in mind, there are several things, you should know right before you take up the “REFINANCING” option, and they are:

  1. Get to know about the credit score 

When it comes to mortgage loan refinance in New Jersey, it’s important to learn about your credit score. All the lenders have tightened their standards for loan approvals. You will be surprised to know that even with excellent credit, you might not qualify for the lesser interest rates. Lenders look for a credit score of 760 or much higher than that to provide the lowest mortgage rates. Borrowers with lower scores can still get a new loan, but they might have to pay much higher fees or interest rates.

  1. Learn about the “Debt-To-Income” ratio

People with a mortgage loan might think they can easily obtain another one. But lenders will not increase the bar for credit scores but will also become much more strict with the DTI or debt-to-income ratios. Several factors, such as stable and long job history, having a higher income, or substantial savings, can make you qualify for the loan.

But lenders will try to keep the monthly housing payments under 285 of your monthly income. Remember, your DTI ratio should be less than 36%, even though some lenders go up around 43%. Make sure that you pay off all your debts right before you think of refinancing the mortgage loan.

  1. The refinancing costs

The mortgage loan refinances in New Jersey can cost around 3 to 6% of the total loan amount. But the borrowers can easily find many ways to lessen the cost. When you have proper equity, you can easily roll the cost to the new loan [and increase the principal].

You will also come across numerous lenders who will provide you with a no-cost refinance. You will pay a higher interest rate to cover the closing costs. But make sure that you shop around a little and also do some negotiating. It’s because the lender can reduce or pay some of the refinancing fees.

Parting Words

When you have decided to refinance the mortgage loan, it is important to check several things before doing so. Credit score, refinancing cost, and debt-to-income ratio should be checked at all costs. Doing so will help you get the refinanced work done quickly and effectively. If you’re having difficulties in getting the refinancing work done, you can take the help of the experts to learn about it before thinking of proceeding further.