The purchase of a home can be an overwhelming process. From securing a mortgage from a lender to moving through the inspections, appraisal, and closing process, it is easy to see how buying a house is challenging. In some instances, you may need to close on a home and secure a mortgage that is not as ideal as you would like it to be. Fortunately, you can refinance this mortgage after a period of time. Here are a few signs you are ready to refinance your mortgage.
ARM Rate Is Changing
If you secured a fixed rate mortgage, you do not need to worry about your interest rate changing over the course of a loan. However, many buyers opt for the adjustable rate mortgage option because it allows them to save some money in the early part of the loan.
Unfortunately, an adjustable rate mortgage will most likely cause your interest rate to increase, which increases your monthly mortgage payment. Refinancing your ARM loan into a conventional, fixed rate loan is smart if you want to reduce interest charges while lowering your payment.
It is important to note that certain factors will determine if you will be able to refinance your ARM loan into a fixed rate mortgage. You should have sufficient income and a good credit score to ensure you qualify for this refinancing option.
Credit Score Has Improved
Timing is essential when applying and closing on a mortgage because an interest rate is locked in at a set time when securing the mortgage. If your credit score was not as high as you and your lender wanted, your interest rate will be higher. Thankfully, you can refinance your loan once your credit score improves.
Most lenders agree that the higher your credit score, the lower your interest rate will be. On average, a credit score of 750 or higher will secure you the best interest rate possible. Increasing your credit score will allow you to refinance the mortgage at a lower rate with a lower monthly payment.
To improve your score, consider paying down balances on your credit cards and other loans. Contact your credit card companies to request credit line increases, as well. These increases will improve your debt to net ration, which will boost your overall credit score.
Saving money is possible by refinancing your mortgage, but certain conditions must be met. If you have an adjustable rate mortgage currently or your credit score has improved drastically, consider refinancing the loan today. To learn more, contact a business such as Acceptance Capital Mortgage.