- 1). Access your credit report before searching for refinance programs. A credit score can make or break a refinance, so it is important to know where you stand. Go to AnnualCreditReport.com for a free copy. You can also pay for your FICO score. Scores over 720 are great, but scores below 600 are poor. A FICO score will help you determine what general range you fall into (for example, scores between 650 and 700 are good to great, scores between 600 and 650 are average to good). In addition, a FICO score will help you determine which lenders will likely finance your mortgage.
- 2). Review the HELOC paperwork and make a list of pros and cons with regard to the loan. Presumably you are refinancing because there is something about the HELOC that you dislike, but there may be aspects you like, too. Clarify these before you search programs as it will help you weed out offers and hone in on attractive ones.
- 3). Decide what type of mortgage you want. Some customers do a full refinance when they refinance their HELOC accounts. This means wrapping your first (and second, if applicable) mortgage and your HELOC into one new fixed-rate loan. However, you can also choose a straight second mortgage, though, you may be charged a higher interest rate.
- 4). Research lenders. Use your credit report and rating as a guide. Local banks and credit unions usually only cater to customers with scores over 720. If you have some credit problems, you might need to apply with mortgage brokers and finance companies, too.
- 5). Review all loan offers carefully. Look back at your list of pros and cons and try to choose the refinance offer that satisfies your financial goals, but also retains the positive elements of the HELOC. For example, you may not want to "restart the clock." If you do not want to do this, you'll need to refinance for the number of years left on your existing HELOC--not another 30-year loan.
- 6). Choose a loan offer and turn down all other pending applications. Follow the loan process carefully. Keep abreast of any and all changes to the rate and payment after the application advances through the underwriting department. Do not sign the refinance unless the final terms are still favorable.
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