If you know a mortgage refinance is in your future, then there are many things you can do to prepare ahead of time for success. By taking the time and making the effort to prepare before applying, your refinancing experience will be smoother, faster, and very likely less expensive.
To this end, here are some tips to get you started.
Tip: Pay Off as Much Debt as Possible
When you apply for a mortgage with a refinance broker, they will look at how much income you have versus the amount of debt you are responsible for. This is known in the industry as your income-to-debt ratio. If you have too much debt compared to your income, then you may not be able to get a mortgage or the terms may be less favorable.
To help prepare things in your favor, pay off as much debt as you can before you apply. This is especially important if you have debts such as car loans with large monthly payments. If your car loan is set to be paid off this year, then make the effort to get it paid off early so the payments won't negatively affect your debt-to-income ratio.
When you pay off debt, make sure you keep careful records and receipts in case the updated information has not yet hit your credit report when applying for mortgage refinancing.
Tip: Check Your Credit Report and Address Any Errors
Before applying for a mortgage, first, take a moment to review your credit report and address any errors found on it. Credit report errors are actually very common and many borrowers find entries needing to be addressed.
For example, you may find an account claiming it is past due even though it was long ago paid off. Or, you may find accounts that don't even belong to you. This is especially true if you have a very common name.
While you cannot have accurate entries removed from your credit report, you can request errors be fixed and errant entries removed.
If they are negatively affecting your credit rating, removing and fixing incorrect entries can greatly improve your score. And, the better your credit score, then the more favorable your mortgage refinance terms will be.
Finally, it is important to note that credit reporting agencies don't always work quickly to fix errors and investigate claims of errant listings. The reality is the process can take a couple of months. For this reason, it is vital you request changes as soon as possible.
Consult with mortgage refinancing services to learn more tips.