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Most consumers know by now that mortgage rates are approaching all-time lows. With the national average for a thirty-year, fixed-rate mortgage hanging just under four and a half percent, there has never been a better time to buy a new home – or to refinance your home loan on a property your already own. It’s ironic that, when so many people are terrified of losing their homes to foreclosure, it’s easier than ever for consumers to afford their own residences. With rates so low, many consumers are finding that their closing costs are either nonexistent or ridiculously low. In terms of refinancing, the experts say that if you stand to save more than a quarter point, it is worth giving it a try. Of course, just because home loans are affordable certainly doesn’t mean that they are easy to obtain. Getting financing (or refinancing) on a home is one of the hardest things to do financially at the moment.

It shouldn’t surprise you that not every applicant will have a shot at the very best deals on new or refinanced home loans. If you are thinking about refinancing your home mortgage and are hoping to get one of those killer deals, then you’d best double-check your qualifications now. If, for example, your credit score is less than the “great credit” cut-off of seven hundred twenty, you might well be turned down. If that’s not the case, you could end up paying a higher rate than the one advertised. Your lender can check your credit score for you ahead of time to give you advance warning as to whether you can expect any trouble, or you can order a score from FICO for less than twenty dollars.

The state of the equity in your home could also become a deciding factor in whether or not you get approved for a refinancing deal. If the price of your home has fallen too much, your initial down payment or any accumulated home equity could well be wiped out. There’s a reason that as many as half of all homes in the United States are currently considered underwater – home values have tanked in the last three years or so. You will be ineligible to refinance your current mortgage if the loan is worth more than the house. The way to know this for certain is with an appraisal, but those can be expensive. A good first step would be to get your lender to run what’s called an “automated valuations model” on your property, checking comparable homes in your neighborhood that have sold recently. This should be free of charge. Don’t bother paying for an appraisal for a refi unless your lender tells you with reasonable certainty that you have at least twenty percent positive equity in your home with which you can qualify for refinancing.

You can also expect that your income will be called into question. Even if your credit is stellar and your equity is good, you might have qualification issues if either you or your spouse is unemployed at the time of the refinance. It doesn’t matter if you are managing to pay your bills and haven’t seen any impact on your credit – your lender will still want to see a steady income history spanning at least two years. A period of joblessness will reflect poorly, no matter how bad the economy or how little it has affected your ability to pay for your bills.

If you have managed to hit all these qualifications, the next step is to decide what the best new mortgage is for you. The industry standard is a fixed-rate, thirty year mortgage, but that is not necessarily the nest option for every homeowner. There are numerous online calculators intended to help you figure out which mortgage option will give you the most bang for your buck at different periods of your life, but there are several things to consider. Younger homeowners who might struggle a bit with bills could benefit from lower monthly payments and almost certainly have the time to chip away at a mortgage, so the typical thirty-year plan just might be the best bet. Those closer to retirement who will be very old after thirty years might look at a fifteen year mortgage, especially if they are getting a much better rate and can swing the higher payments. On the plus side, you can expect your rate to be around half a percentage point less for a shorter repayment plan, but your monthly payments could be the same or higher. Of course, this is nothing compared to the security of knowing that you could own your home when or soon after you retire. Another choice is to take the thirty-year loan and just commit to paying extra on the principal payments every month. The choice is totally yours.

One decision to avoid, no matter what your situation, is an adjustable interest rate. It can be extremely tempting to go with an ARM, given how low these rates are, but you can never lose sight of the fact that these rates can and will inevitably reset down the line. In the best of cases, you will need to refinance again and lose time and money. In the worst of cases, inflation could take hold (as experts are warning could happen), rates could soar, and you could end up in hot water. If rates should happen to move lower again, you can always refinance again in that case.

Keep in mind that you can never look solely at the annual percentage rate of your loan when you are considering refinancing, because this is only one piece of the equation. You also need to consider what costs and fees you might be assessed. Extra points (costs equal to one percent of the loan) might be added when you consider how much it will cost to pull the deal together for your broker. Make sure that there is not more than a quarter point of difference between the APR and the quote for your total costs. Also keep in mind that you will likely pay more for so-called “jumbo” loans, or those written for more than a certain percentage above the median home price in your neighborhood. For example, Fannie Mae and Freddie Mac start jumbo loan rates at four hundred seventeen thousand dollars. You also need to consider the cost of escrow, which includes your property taxes and homeowners insurance. In some situations, you will not get a choice as to whether or not you add escrow to your payments. I personally like the security of knowing that my taxes and insurance are taken care of without too much interference from me, so I’d go with escrow if given the choice. Other people who are not required to do it feel that they’d rather pay a single bill. That’s another decision that you will need to consider.

Once you have met the qualifications and decided on a mortgage, your final step towards refinancing your home is to decide upon who will help you do the work. You can get a mortgage (or, of course, do a refinancing deal) either directly from a lender, or through a mortgage broker. There are pros and cons to either choice, but you can expect to have to jump through lots of hoops and to provide more paperwork and documentation than you ever could have thought humanely possible. The property will be appraised during this step, and your credit and financial history will be examined with a fine tooth comb by the bank’s underwriters. At this point, you will lock in a rate for thirty days, at some point during which you will close on the deal. Don’t worry if the rates should happen to drop in the interim – many lenders are generous enough to allow you to access the new rate for free and without interrupting the process.

There are online matching services that you can access if you are looking to find a bank or broker. Many of them advertise on TV with promises that they will make lenders compete for your business, and this is technically true – you’ll still need to wade through their loan offers and possibly talk to a lot of different people, however. You can also use a simple online search engine query to find mortgage brokers in your area, and go from there. Make sure that you check out the company’s profile through the Better Business Bureau, since you will be trusting these people with the future of your home! Don’t just go with whomever has the most advertisements, or the lender that you saw in a TV ad or heard about through a jingle. Recommendations from past customers are best, followed by strong endorsements on business review sites on the World Wide Web.

Refinancing your mortgage can turn out to be a serious blessing, if you are able to pull it off. Lowering your monthly bills (or at least making the terms more favorable) is never a bad thing, especially for those who have managed to steadfastly pay their mortgage payment every month during a period of time when people have been walking away from their obligations left and right. Bets of luck to you in your endeavors, and may you have many years of happiness in your home.