Do the Math
Once you’ve gathered all the loan information, compare costs between lenders and with your current mortgage. This loan comparison chart can help organize the information. Remember that a lower interest rate will also result in less money you’re able to deduct on your income tax. If refinancing does save you money, or helps you achieve your objective, choose a lender. To keep your business, your current lender may offer a better loan term than what you found on the market. If you are unsure about your options, the U.S. Department of Housing and Urban Development offers non-profit counseling.
Apply for a Loan
You will have to fill out the Uniform Residential Loan Application, also known as the 1003, with a loan officer. To fill this out you will need to know the type of mortgage, property information, personal information like employment and monthly income, and information regarding credit and bank accounts.
Within three days of submitting your loan application, the lender must give you two documents:
- Truth in Lending, which details the loan, payment schedule, interest rates, finance charges, and fees of your loan
- Good Faith Estimate, which describes the amount of closing cost fees you are likely to have to pay
If you’ve already missed payments on your current loan, or racked up huge credit card debt that you’re hoping a refinancing will help you get out of, finding a new loan may be hard. However, as we’ve seen with the subprime lending scandal, there are some unscrupulous lenders on the market. Therefore, it pays to do the math and figure out if refinancing will put you in a better spot financially—or whether it’s worth the trouble at all.
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