How to Trade in Your Home Mortgage
- 1). Pull a copy of your credit report before you start in on the process. You can get a free copy at AnnualCreditReport.com. This site also provides FICO scores, but you'll need to pay to see your three-digit number. These scores range between 300 and 850. Scores over 720 are excellent. Scores below 600 are poor.
- 2). Review your current mortgage paperwork. Before wading into the the mortgage market, you'll need to know what to look for and what to avoid. Make a list of pros and cons with regard to your current loan. Also write down your financial goals (save money monthly, get out of debt faster). These lists and this knowledge will be invaluable as you begin to research loans.
- 3). Start looking for mortgage lenders based on your goals and your credit score. If you simply need a 30-year conventional, fixed-interest loan and you have great credit, it's best to stick to local banks and credit unions. These institutions offer very competitive fees and rates on home loans. However, if you have some credit problems, you'll also need to research finance companies (such as HSBC Finance Corporation and Wells Fargo Financial).
- 4). Collect a variety of mortgage offers by filling out mortgage applications. Do not apply to more than three or four lenders. Too many credit inquiries will begin to drop your FICO score. Look at these offers side-by-side and pay close attention to the fees involved.
- 5). Compare these offers against the lists you made earlier. Make sure any mortgage program you choose accomplishes at least some of your financial goals. In addition, make sure the new loan will get you out of any disadvantageous programs found in your existing mortgage (for example, an adjustable rate).
- 6). Choose a loan offer and complete the loan process. Turn down all other pending mortgage applications. Make sure to check all the final paperwork before you close the loan. Fees, rates and terms can change after underwriters take a look at your income documents and do an appraisal on your home. Make sure the final terms are agreeable and fair. To close on your new mortgage, you will likely need documents from your old mortgage as well as current tax returns and proof of your income.
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