But before you start the refinancing process, you’ll need to get organized. Here are some tips from the Washington State Department of Financial Institutions. Each lender’s criteria may be a little different.
- Gather and organize paperwork, such as such as pay stubs (covering one to two months), W-2 forms (two years), tax returns (two years), bank and investment statements (most recent), proof of current homeowner’s policy, and copy of latest tax assessment.
- Check your credit report and dispute any errors right away. Bring your credit report to your lender or broker. You can obtain a free credit report online at http://www.annualcreditreport.com/. Write and file with the credit bureaus any letters of explanation applicable to your circumstances if appropriate (you are the victim of identity theft or an illness or other one time catastrophe caused your delinquency).
- Obtain your credit score. Credit reporting agencies charge a fee to obtain your credit score, but it’s a good idea to know your score before you talk with a lender or broker. If your report has an error talk with the bureaus about their rapid rescore procedures and the cost of a rapid rescore.
- When shopping, ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.
- Ask whether the rate is fixed or adjustable. If the rate quoted is for an adjustable-rate loan, ask when and by how much your rate and loan payment will vary.
- Ask the lenders if they charge an interest rate lock fee and if so, if it is refundable if the agreement expires.
- Ask about the loan’s annual percentage rate, which takes into account not only the interest rate but also discount points if you choose to buy down the interest rate, broker fees and other charges you may be required to pay to finance the loan.
- Ask about fees. Loans often involve many fees: loan origination, underwriting, mortgage broker, settlement (per diem taxes and insurance), and closing costs. Every lender or broker should be able to give you an estimate of the fees, many of which are negotiable.
- Ask the lenders who will own your loan and who will service your loan. There may be three parties involved in your loan transaction, the lender, the investor they sell your loan to shortly after closing, and the company who purchases the right to service your loan.
- Verify lender or broker is licensed to do business in Washington. Verify by contacting the Department of Financial Institutions at http://www.dfi.wa.gov/ or 1.877.RING DFI (746-4334).
- Take advantage of free resources. Washington residents can request a free copy of DFI’s Guide to Home Loans at http://www.dfi.wa.gov/consumers/publications/home_loans.htm. The Federal Reserve also has published a Consumer’s Guide to Mortgage Refinancing at http://www.federalreserve.gov/pubs/refinancings/default.htm.