A very popular refinancing option is one where either the rate or term changes. The qualifications and paperwork necessary for a rate and term refinance are almost identical to that for purchasing a home, minus the inspections, real estate agents, and sellers. The home will be appraised and the rate you qualify for will be based on LTV (loan to value), loan size, DTI (debt to income ratio) and credit scores. It’s important to know all of the factors that go into determining a rate when you begin shopping for a mortgage company. If you were to call and ask,”What are your rates today?” and get an answer along the lines of , “3%”, then you need to hang up and call a different company. Reason is, that person is just telling you what you want to hear instead of getting the information needed to give you an accurate answer.
Do you want your mortgage lender to be honest with you or just tell you what makes you feel good?
There are several old rules of thumb out there that mislead people. For example, many people believe your rate has to drop 1% in order for a refinance to make sense. This is just not the case. Let’s take a look at a few examples as to why that way of thinking is incorrect.