- 1). Talk with your existing lender before refinancing a variable-rate mortgage into a fixed rate with a different lender. It's very expensive for financial institutions to generate new business. Your lender wants to retain your business. Some lenders will waive closing costs (which are thousands of dollars) for existing customers.
- 2). Find the best interest rate. If your lender doesn't offer an attractive fixed-rate mortgage to retain your business, it's time to shop around. Consider using online tools, such as Bankrate.com's, that allow you to compare interest rates across the country.
- 3). Evaluate interest rate points. Points, which are also called discount fees or origination fees, allow you to pay a fixed fee to lower your interest rate. For example, if you "buy down" the interest rate by 2 percentage points, you might end up paying thousands of dollars upfront, depending on the lender. Points aren't always a bad deal. You need to evaluate how long it would take to break even. For example, if buying down the rate lowers your monthly payment $200 a month, and if the cost to purchase points is $3,000, it would take you 15 months to break even. If you plan on staying in your home longer than 15 months, it's a good deal.
- 4). Evaluate closing costs. When shopping for a mortgage, ask lenders about closing costs. These costs vary depending on the lender and the amount financed. Understanding what each lender charges will help you choose the best fixed-rate mortgage product.
- 5). Provide the necessary information. Once you've selected a lender, you'll be required to complete a loan application. Most lenders will also require an appraisal of the home. The cost for an appraisal, about $400, is included in your closing costs. Current pay stubs from your employer, up to one year of bank statements, and copies of retirement and investment accounts might also be required, to establish how much you have in assets.
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