This article first appeared on HSH.com.
While the essential elements of shopping for a mortgage are the same for a home purchase or a refinance, the refinancing process usually starts with a decision to either improve your cash flow or change your debt profile, says Russ Anderson, a centralized sales executive with Bank of America in Los Angeles.
He says you should determine your goal for refinancing before you meet with a mortgage professional. Once you've decided whether you want to reduce your payments or pay off your mortgage faster, you can begin shopping for a lender and a loan.
"The average consumer shops for a refinance like they're shopping for a flat-screen TV," says Barry Habib, chief market strategist for Residential Finance Corp. in Columbus, Ohio. Everyone's price conscious, he says, but not everyone does their homework to determine which product best suits their short- and long-term goals.
6 Steps to Shop for a Refinance
1) Start online. Deborah Ames Naylor, executive vice president of Pentagon Federal Credit Union in Alexandria, Va., recommends using a refinance calculator, which estimates your monthly payments at various loan terms.
"A shorter term loan will have a lower interest rate than a 30-year fixed-rate loan, but the monthly payment will be higher because you're paying it off faster," Naylor says. "It's important to decide what payment you're comfortable making before you see a lender, because that payment could be much less than the payment you qualify for."
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