Mortgage rates are at record lows and should stay that way as long as economic reports continue to be disappointing, according to Bankrate.com, which tracks mortgage rates weekly. However, if you've been thinking about refinancing, you should act quickly. If mortgage rates rebound, they could do so quickly, according to Bankrate.com.
But don't make mistakes in your rush to refinance. Here are five of the biggest ones, according to a survey of LendingTree network lenders. LendingTree is an online marketplace of mortgage lenders.
1. Over-estimating the value of the home. Despite the fact that home values continue to drop, homeowners still tend to over-value their home. As a result, they receive higher-than-expected loan offers. Use our tool to track home prices in your area so you'll have a better idea how much your house is worth.
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2. Hesitating to lock in low rates. Lenders are seeing borrowers waiting for rates to drop further, missing out on the opportunity to lock-in with the current low rates.
3. Focusing only on interest rates. Borrowers often forget to factor in lender fees, loan terms and lender reputations into their decision to refinance. Compare several offers and run all the numbers (including fees) using calculators at Mortgage Professor to see which offer is the best and to determine whether refinancing even makes sense for you.
4. Overlooking shorter-term loans. Remember, the 30-year mortgage isn't your only option. A 20-year or 15-year mortgage can shorten the life of the loan and significantly reduce the amount of interest paid.
5. Not knowing what documents are required to refinance. If you haven't taken out a mortgage or refinanced recently, you might not be aware that you need a lot more documentation these days to get a loan. Be ready to provide pay stubs from a recent month, two months of bank and other financial statements, two years of W-2s and, if you're self-employed, two years of tax returns showing self-sustaining income.
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