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How to refinance your mortgage in 2022

Get the best deal you can, if refinancing is right for you.

A lot can change over the 30 years of your mortgage. And if you find the terms of your loan no longer fit with your financial situation, it might be time to refinance. Most homeowners can refinance their mortgage in one to two months, and some lenders will let you handle the whole process online.

4 steps to refinance your mortgage

Refinancing a mortgage can take time. To maximize your savings and make the process as seamless as possible, there are a few steps you should follow:

Step 1: Get ready to refinance

With a few preparations, you can start your refinancing journey more prepared.

  • Evaluate your reasons for refinancing. Be sure refinancing makes financial sense for you. Shortening or keeping your current loan term while scoring a lower interest rate is the name of the game.
  • Check your credit score. Most lenders require at least a 620 FICO score, though government-backed streamlined products may come with no credit requirements. Still, a higher credit score can lower your rates. To make sure yours is as accurate as possible, request a copy of your credit report from the three major credit bureaus: Experian, Equifax and TransUnion. If you find any errors, work toward getting them corrected.
  • Estimate the value of your home. Get an idea of your home’s value by researching recent sales of similar homes in your neighborhood.

Step 2: Compare lenders

Get the best deal you can and the right terms for your loan by researching options.

  • Compare mortgage rates. Shop around for the best rate by comparing banks, mortgage companies, credit unions and loan brokers. Remember, lenders pull your credit report to determine if you’re a good applicant, so whittle down your list to the lenders that meet your needs to avoid unnecessary dings to your credit. Ask questions about rates and loan programs, and choose a lender that’s knowledgeable, patient and checks the right boxes.
  • Identify the extra costs. A home loan refinancing can be costly. Lenders may charge application, origination, document processing, underwriting, recording and tax transfer fees. Also consider the cost of an appraisal, credit report, title research and insurance. Your lender should be transparent about these fees upfront.

Step 3: Apply for a mortgage refinance loan

Each lender will have its own process, but these are the basic elements:

  • Apply for the loan. Review the rate estimate you received from your lender, which includes the loan offer and the list of fees. Begin filling out the loan application. You’ll need to supply your lender with these documents:
    • Employment and wage information, such as your pay stubs, tax returns and W-2s or 1099s.
    • Profit-and-loss statements if you’re self-employed.
    • Homeowners insurance policies.
    • Statement of assets like copies of statements for savings accounts, retirement accounts, stocks, bonds and CDs.
    • Statement of outstanding debt like account statements on your existing mortgage, car loans and student loans.
    • Driver’s license or passport.

    Your lender will want to see every page of every document, even if it’s blank.

  • Get an appraisal. At this stage, your lender orders an appraisal of your home. If the appraiser thinks your home is worth more or less than the lender expected, the terms of your loan could change.
  • Lock in your refinancing rate. Once you have a rate, there are two options: you can lock it in or float it. If you’re happy with the rate, lock it in with your lender. That way, it won’t change prior to closing the new home loan. If you let your rate float, it could end up being lower or higher.
  • Collect and submit paperwork. Like most processes, refinancing requires lots of paperwork. Gather your pay stubs, bank statements and tax returns. You may also need to supply your lender with letters of explanation (LOEs) explaining anything from your employment history to bank transactions.

Step 4: Close on your new mortgage

Once your loan is approved, you’ve only got a couple of short tasks to complete.

  • Sign loan documents. Once you submit your paperwork and get a home appraisal, the loan should be ready for your lender’s approval. You’ll be sent a Closing Disclosure form, which you need to review, sign and return to your lender. You’ll then sign your loan documents, either electronically or at the title company or closing attorney’s office.
  • Close the loan. To finish, your lender double-checks your credit and employment information to make sure nothing has changed. If all goes well, the lender pays off your existing home loan and records your new one with the county.

How to get better refinance rates

To score the best refinance rate on your mortgage, do your research and shop around. Other ways to potentially improve your rates include:

  • Improving your credit score. Your approval and interest rates are determined in part by your credit score. And improving yours could be as easy as correcting errors on your report. Pull your credit report from the three major credit-reporting agencies. If you find any errors, dispute them by contacting the credit bureau.
  • Reducing your debt. Pay down your debt and resist the urge to open new lines of credit or make big credit card purchases. This can improve your debt-to-income (DTI) ratio, which can improve the terms of your refinance as well.
  • Thinking about a shorter loan term. This can lower your interest rate and reduce your interest payments over the life of the loan. It may increase the amount of your monthly payments, though, so make sure they still fit in your budget.
  • Avoiding cashout refinancing. This allows you to cash out some of your home’s equity as part of a new loan. As tempting as it is, it also increases your loan-to-value (LTV) ratio, which can cause your interest rate to spike.
  • Seeing if the government can help. If you have an FHA loan, you may be eligible for the FHA Streamline Refinance. It doesn’t require a home appraisal, so it’s beneficial if your home’s value dropped. Other government-insured mortgages have similar programs.
  • Locking in your refinance rate. Rates go up and down depending on the economic and political climate, and the processing time for loans can take weeks or months. If you’re happy with your rate, ask your lender to lock it in. That way, if the rates rise, they won’t affect your loan.

Compare mortgage refinance lenders and brokers

Compare these lenders and lender marketplaces by the type of home loan you’re searching for, state availability and minimum credit score (for a conventional loan). Select See rates to provide the company with basic property and financial details for personalized rates.

Name Product Loan products offered State availability Min. credit score
AmeriSave
(NMLS #1168)
AmeriSave
Conventional, Jumbo, FHA, VA, USDA, Refinance
Not available in: NY
620
Great customer reviews and customized rate quotes in three minutes with no SSN needed.
Rocket Mortgage
(NMLS #3030)
Rocket Mortgage
Conventional, Jumbo, FHA, VA, Refinance
Available in all states
620
Streamline your mortgage from quote to final payment — all from your computer or phone.
Veterans United
(NMLS #1907)
Veterans United
Conventional, FHA, VA, USDA, Jumbo, Refinance
Available in all states
620
Veterans United stands out from other lenders for its focus on serving the military community.
Better
(NMLS #330511)
Better
Conventional, Jumbo, FHA, Refinance
Not available in: HI, MA, MN, NV, NH, VT, VA
680
Refinance your home loan using an easy online process.
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Compare up to 4 providers

5 potential reasons to refinance your mortgage

Knowing why you want to refinance can help determine the type of refinance loan you need.

  1. Reduce your monthly payment. Refinancing to a longer term or lower interest rate can both help reduce your mortgage payment. For example, if you took out a 30-year fixed mortgage on a $300,000 loan when the rates were 6%, and they’ve now fallen to 4.5%, that drop would shave $279 from your monthly payments, or $3,348 a year.
  2. Shorten the term of your loan. If your income has increased, you may be able to afford the higher monthly payments that come with a shorter loan. For example, from a 30-year fixed to a 15-year fixed to pay off your mortgage faster. By aggressively paying down your mortgage, you’ll probably save thousands in interest over the life of the loan.
  3. Lengthen the term of your loan. If you’ve had a drop in income or another serious financial hit, refinancing to a longer term can help free up more money, allowing you to pay off your loan more gradually.
  4. Tap into your home’s equity. When you need cash, you may have enough equity in your home for a cashout refinance. Mortgage rates tend to be lower than those of personal loans, so this can be a cost-effective way to achieve your goals. For a cashout refi, you’ll need to stay within your lender’s loan-to-value (LTV) threshold. This is your mortgage divided by the appraised value of the property.
  5. Convert from an adjustable-rate to a fixed-rate loan. When you have an adjustable-rate mortgage (ARM), your monthly payment can go up and down as interest rates change. Refinancing to a fixed-rate loan with stable payments can offer homeowners a sense of security and set payments for easier budgeting. Since interest rates are low, locking in a fixed rate now protects you from any rises in interest rates over the life of your loan.

Must read: When is an ARM a good idea?

Converting to an ARM might be a good idea for homeowners who don’t plan to live in their home for more than a few years. Since they won’t be there that long, they don’t need to worry about rising interest rates in the future. An ARM also might be a good idea if you find interest rates falling and you’re willing to refinance to a fixed-rate loan when they start to creep back up.

What to look out for

Refinancing has its risks and drawbacks. These include:

  • High closing costs and hidden fees. Between paying lender fees, appraisal fees and pulling your credit report, refinancing can be a pricey process. If you’re not planning to live in the home for much longer, those costs may not offset the savings you’ll score from refinancing.
  • Diminished home equity. By cashing out part of the value of your home, you’ll have less equity if you eventually sell the property.
  • Longer terms. While this leads to a lower monthly payment, it increases the interest you’ll pay in the long-term. And it means you won’t be free from debt for a while.
  • Tax impact. Lowering your interest rate saves you money, but it may not be worth it when you weigh it against the tax deduction you can take against the interest you pay each year.

What is no-cost refinancing?

Be wary of the “no-cost refinancing” sell. This usually means the lender is adding those fees to the ongoing costs of your loan, so you’ll end up with a higher interest rate or the fees are added to your loan balance.

Bottom line

You can help ensure a smoother refinance process by preparing your paperwork and researching lenders. To score the best possible deal, compare several mortgage lenders before applying.

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