It is safe to say that our real estate market is drastically different than it was in 2004. But with the market changing to a "buyers market" are there things consumers should consider before refinancing their existing loan? Absolutely, and anyone who advises you to refinance without considering all your financial options is steering you in the wrong direction. As a lender that is a pretty bold thing to say since many lenders entire livelihoods depend on you agreeing to a refinance. Now that foreclosures are higher than ever you simply must consider what a refinance might mean to you and how it will impact you down the road. 

There are very important things you need to be aware of anytime you decide to explore your refinance options. These are just some of the things you should know and be aware of:

Reasonable Value of Your Home: This might be a very hard thing to determine if you have a custom or truly unique home. It is important to retain copies of appraisals done on your home from your purchase or previous refinances. While your home likely (depending on the state and market) has increased in value the appraisal might yield light in to an approximate value for your home now. It at the very least is a good starting point.

You might also consider using a website like Zillow. Keep in mind that there is always a risk of values being off marginally or even significantly.

It helps to have an idea of the value of your home because it will make a significant impact on the interest rate and programs you can qualify for from any lender.

Debt & Your Credit Score: Your credit cards balances, car loans, student loans and other revolving debts have a lot to do with your credit scores. Especially if you pay any of them late. Typically credit card interest rates are higher than mortgage rates. Depending on the value of your home it could be a wise decision for you to pay off your high interest non tax deductible credit cards and roll it into a new mortgage. 

Your credit score will play a major role in what interest rate you might qualify for and what your payment will be. If you don't know your credit score you should. Experian, Equifax, and Transunion all offer services for you to get your credit score and the report. Just because you think you have good credit does NOT mean that is what the credit agencies are reporting. Get a copy of your credit report. 

Your Household Income: For some people refinancing can free up hundreds and even thousands of dollars each month to help alleviate the loan of monthly debt. This however can be complicated if you cannot justify your income to your debt. If you are paying more than 50% of your income to your debts each month you will likely have trouble qualifying for a loan using conventional means. 

DO NOT JUST GO DOWN THE EASY RODE.

Some lenders may offer you a "No Doc", "Stated" or "No Ratio" loan. Regardless of if you can be qualified for one of these loans you must be able to reasonably pay the monthly mortgage payment. In my history I have advised people not to continue with a refinance when it would provide no reasonable benefit or if it was overextending their income.

At the end of the day you have to determine if you can justify the new mortgage payment based on your ability to pay it each month. If you are the least bit concerned, trust your better judgment and wait. It is better to do what is safe than find yourself upside down in a mortgage that you can no longer afford.

Finding A Lender: The internet is a powerful tool that can aid you in your search for a trusted lender. It is my experience that finding a lender in your city, town or state is best. These days it is not necessarily best to go with the largest or most name brand lenders. What matters most if finding someone you can trust and that you know has your best interest in mind. 

Mortgage professionals set themselves apart by blogging, personal websites, and word of mouth. Finding a mortgage professional is as easy as typing in important topics on a search engine. Read about them and find out what they have to say. You'll find that you can get to know them far in advance and get an intimate look at not only what they know, but who they are.

Trust, professionalism, dedication, and service. These are all tenets that established mortgage professionals will live their lives by. Partner with them to plan your mortgage decisions and act accordingly. 

In Conclusion: Many times in my career I have simply advised clients not to refinance. In the end it is completely a case by case matter that is extremely important and should not be entered into lightly. It is important to always consider what is best for you in the long run and not just will offer you a quick fix. When you partner with a trusted mortgage professional you will find that you can start down a path that will bring you great financial freedom. Refinancing is right for you when you decide it is. Period. 

Feel free to visit my website and fill out an application today!