Instant Refinance Quotes Online – 7 Things You Should Know

Sure, you can start getting free quotes without doing any research. But if you want to do things right, you need to learn a little about how the quoting process works. Here are some key things you should know about applying for a refinance loan online.

1. It’s a big time saver.

Getting Internet quotes is a great way to save time and energy. It lets you narrow the field of lenders to the ones that are (A) willing to work with you and (B) able to offer a decent rate. So you can quickly zero in on the best lender for your needs.

2. You should practice Internet security.

Practice Internet security when getting mortgage refinance quotes online. Whenever you fill out a form that asks for personal information, make sure it’s a secure website. One way to do this is by looking at the web address. It should start with “https://www…” if it’s a secure web page. The “www” part is optional, but the letter ’s’ is important. If the web address only starts with “http://” (without the letter ’s’), then it’s not a secure page. Keep this in mind when you get online refinance quotes from lenders.

3. Be prepared for the follow-up process.

In truth, the application process only starts online. After you get the initial quote from a lender, you’ll be asked to submit additional documents. This usually includes W-2 statements for the past two years, bank statements, income verification, etc. I would not send this stuff through the mail. I recommend submitting these documents in person, through the lender’s local office.

4. Your credit score will survive.

Multiple quotes probably won’t affect your credit score very much, if at all. So feel free to shop around and get refinance quotes from several different lenders. The people who create the credit-scoring models (such as the FICO score) realize that people shop for rates when refinancing their homes. So they build a certain amount of “intelligence” into their scoring models to allow for this.

5. Do some research first.

Do your research first before applying for refinance quotes online. For starters, you should find out what your credit score is, and make improvements if necessary. If you want to get the lowest possible rates when refinancing, you’ll probably need a score of 760 or above. Research this early, because it takes time to improve a credit score.

I hope this article has given you a better understanding of mortgage refinance quotes and how they work. Remember, the key tips from this lesson. Using the Internet can save you a lot of time and energy. You can apply with different lenders in a short period of time without lowering your credit score much. You need to practice Internet safety / security when getting quotes online. It’s a good idea to check your credit score before starting this process, and to gather your financial documents.

Questions You Need to Ask Yourself

I see a lot of articles like this one online, but many of them only tell half the story. They give you a list of questions to ask your lender when refinancing, but they neglect the questions you need to ask yourself. Smart homeowners will start this process by doing plenty of research on their own, long before they start talking to lenders. Here are some of the questions you should ask yourself at this early stage.

1. What are my refinancing goals?

What are you trying to accomplish with your mortgage refinance? Are you simply trying to lower your rate and save money in the future? Switch from an ARM loan to a fixed-rate loan? Pull some cash out along the way? You need to ask (and answer) these refinancing questions early on, so you can have clearly defined goals. Later, when you start getting offers from lenders, you’ll be able to evaluate those offers to make sure they accomplish your goals.

2. Am I upside down in my mortgage loan?

This is an obstacle for a lot of homeowners right now. After the economic recession that hit us in 2009, more than 12 million homeowners became upside down in their mortgage loans (which means they owed more than their homes were worth). If you live in an area that suffered big drops in property values, this is another refinancing question to ask early on. So find out how much you currently owe on your mortgage, and compare that number to your home’s current value.

3. Do I have enough equity?

This is a follow-up to refinancing question #2 above. Once you have determined your equity, you’ll have a better idea if a refinance loan is possible. In the current economy, most lenders will require at least 20% equity on refinancing loans. The lender will send an appraiser out to appraise the money, for this very reason. Some homeowners will measure their own equity, before dealing with lenders. Others homeowners will just wait until the lender’s appraiser comes out. How you go about it is up to you, but you need to ask this question at some point.

4. What is my current credit score?

Times have changed. Lenders today have tougher criteria for refinancing, and the credit score is one of those checkpoint. You’ll need a solid credit score in order to get approved for a refi loan. It’s something that varies from lender to lender, so it’s hard to say what score you need across the board. But if you want to qualify for the best rates the lender has to offer, you’ll probably need a FICO score of 750 or above. This is an important question to ask early in the refinancing process, because it takes time to improve a credit score. So check yours today, and make whatever improvements are necessary — before you apply for a refi loan.

Questions for Your Lender

So let’s assume you have asked all of the questions listed above, and you feel you’re a good candidate for refinancing. Now it’s time to switch gears and ask certain questions of your lender. Here are some items that should be high on the list.

5. Am I a good candidate for refinancing?

Before you start asking about interest rates, closing costs and other details, you need to find out if you’re even a candidate for refinancing the home. As we have discussed, there are several obstacles to refi — you need to have enough equity, a sufficient credit score, etc. So your first question for lenders is: “Do I even qualify for a refinance loan?”

6. What interest rate can you offer?

If the lender tells you you’re a good candidate for refinancing, the next thing you need to know is what interest rate they’re willing to offer you. Getting a low enough rate is the key to success with mortgage refinancing, because it will help you achieve the goals you established in question #1 above. More than anything else, the interest rate on the new loan is what makes refinancing worthwhile — or not. You have to lower your rate enough to accrue sufficient savings over the life of the new loan, and those savings must exceed the amount you pay in closing costs (see next question below).

7. How much are the closing costs?

You need to get an accurate estimate of your closing costs when refinancing your mortgage. These costs are a critical piece of the puzzle, because they might make a refinance loan cost-prohibitive. In others words, if you pay more in closing costs than you save over the life of the new loan, then it doesn’t even make sense to refinance the home.

8. How much will I save over time?

Once you know the interest rate on the new loan, and the full cost of closing, you can use a refinance calculator to determine your savings. This will also tell you how long you have to stay in the home to pass the break-even point — the point where your savings begin to exceed your costs. You can find plenty of these calculators online by doing a Google search.

These are not the only questions to ask when refinancing your mortgage loan, but they are some of the most important. I recommend that you continue your research beyond this website, until you fully understand how the refinance process works. By understanding all of the key steps, you’ll be able to ask all of the right questions. And that’s the key to success. Good luck!

What Credit Score is Needed …

• When it comes to credit scores and refinance loans, there are actually two different “cutoff” points. You will need a certain score to get approved for the refi, and you’ll need an even higher score to get the lowest rates on the loan.
• The score needed to refinance will vary from one lender to the next. One lender might approve you for refinancing with a score of 700, while another one turns you down flat. You have to apply with different lenders and compare their offers.
• Most lenders today claim that a minimum score of 660 is needed to refi, but they are quick to point out that credit is not the only piece of the puzzle. And that brings me to the next point…
• Lenders will take other factors into account when considering you for a mortgage refinance loan. For example, equity is the the biggest obstacle for most homeowners right now. In addition to good credit, you’ll probably need at least 20% equity to get approved for a refi loan.
• In most cases, a credit score of 750 or higher is needed to get the best rates on a refinance loan. You might be able to get approved with a score less than 750, but you won’t get the best rates.
• Getting the lowest possible interest rate is the key to success when refinancing. You have to lower your rate by a certain amount in order to make the whole process worthwhile. If you don’t save enough money over the life of the new loan, then it doesn’t make sense to refinance.
• If a lender tells you that your credit score is below the level needed to refinance, it’s not the end of the road. You can improve your score within a matter of months, and then you’ll have a better chance of getting approved for the loan. Here is some advice on how to do that.
• The best way to find out if you’re qualified for refinancing is to apply for a loan. Thanks to the Internet, you can do this in a matter of minutes. Use the LendingTree links provided at the top and bottom of this blog to get started. It doesn’t cost you anything to apply (in most cases), and it’s the easiest way to find out if you have the score needed for approval.

I hope you found this lesson helpful. Remember, different lenders have different criteria for qualifying borrowers. So if you get turned down by one, be sure to ask them why. They should tell you what the problem was — too much debt, score was too low, not enough equity, etc. Then you’ll know what to work on. And if you find out you don’t have the FICO credit score needed to refinance your home loan, you can use the advice on this page to improve it.

Many homeowners think they will automatically qualify for the lowest refi rates a lender has to offer. But this is not true. If you think back to when you first purchased the home, you’ll recall that the lender assigned the interest rate based on your credit score and other qualifying factors. The same thing will happen during the refinancing process. So once again, your qualification criteria will determine if you qualify for the lowest rates the lender has. You don’t get them automatically.

The next time you visit a lender’s website, or see a commercial on television, pay attention to how they advertise their rates. When they claim to have refi rates as low as 5% (or whatever), I can guarantee it will be followed by a disclaimer. That disclaimer will say something to the effect of: “These rates are for well qualified borrowers. Terms and rates will vary, based on qualification criteria … etc.” And the lender can define those criteria however they want.

In order to get the lowest refi rates, most lenders will require a certain credit score, a certain amount of equity, and a certain debt-to-income (DTI) ratio. How you measure up in these areas will determine whether or not you qualify for the best rates.

To Get the Lowest Rates …

Differently lenders have different standards. So it’s impossible to say what a “well qualified” borrower is across the board. But with that being said, many lenders have similar standards for refinancing. That’s what I’ve listed below. In order to get the lowest refi rates a mortgage lender has to offer, you will probably need the following:

• A credit score of 760 or above.
• At least 20% equity in your home.
• A favorable debt-to-income ratio, ideally below 30%.

Again, this will vary from one lender to the next. But these are the numbers most often reported within the mortgage industry. If you have all of these things going for you, there’s a good chance you’ll qualify for the best rates the lender can offer. And that’s the key to success with mortgage refi loans!

What is Involved With the Process?

When you refinance your home, you are basically replacing your original mortgage with a new one. You are using the new loan to pay off the old one. And when it’s done right, you gain something along the way — better terms, a lower interest rate, etc.

So what is involved in refinancing a home loan? Well, for starters, you should find out how much equity you have in the home. You’ll need a sufficient amount of equity in order to qualify for a refi loan. Once you clear that hurdle, you would begin gathering refinance offers from lenders. Then you would review those offers to make sure the new loan would help you achieve your goals. For example, if your goal is saving money, you would run the numbers to make sure the money you save on the new loan exceeds the amount you pay in closing. Finally, you would close on the new mortgage — a process that is very similar to the first closing you went through, when buying the home.

That’s what is involved in refinancing a home mortgage loan, in a general sense. So let’s summarize the steps mentioned above. Here is the basic process you will go through when you refinance your loan:

• Determine your equity. This is the first step in the process, because you need a certain level of equity (ownership) in the home to qualify for refinancing.
• In order to measure your equity, the lender will send a professional appraiser to appraise the home. This will determine the current market value of your house. By comparing the home’s value to the amount you still owe on your mortgage, you can find out how much equity you have. You’ll need at least 20% equity to refinance, in most cases.
• If you pass the equity “test,” the lender will offer you the terms and interest rate for the refinance loan.
• Next, you would run the numbers to make sure the new loan accomplishes your goals. Primarily, you want to ensure that the amount of money you save (in the form of lower interest rate) is greater than the amount you pay in closing costs. When I say “run the numbers,” I mean using a refinance calculator to measure your future savings.
• In many states (but not all of them), there are laws that prevent lenders from offering refinance loans that do not help the borrower. So if you live in a state with these laws, you will not be approved for refinancing unless it benefits you financially.

This article answers the question: What is involved in refinancing a home mortgage? We will continue to add new lessons to this blog on a regular basis. I hope this lesson gives you a better understanding of how refinance works, and I wish you well in your financial endeavors.