Refinancing Your Home
by Susan Molthop

If you have a variable rate home loan, an undesirable 2nd mortgage, a balloon payment coming due, or your mortgage payments may be going up for any reason, you might need to refinance your home. When real estate prices are going up and money is "loose" this isn't a problem. When prices start dropping and the money supply starts to dry up, refinancing could be a lot more difficult. Plan as far ahead as you can. Here are some things you can do, now, to be ready when it's time to refinance.

• Improve your credit scores.

Pay down credit card balances so you don't owe more than 50% of your total credit line.

Don't apply for or accept any new credit cards unless their terms are better than your existing cards.

Don't buy any new "toys" like a boat or RV unless you can pay cash for it.

Pay all of your bills on time or a little ahead and make more than minimum payments on revolving credit cards.

If you have any "dings" on your credit, do whatever you can to get them removed, now. Don't wait until it's time to refinance. You want to look good for as long as possible before you start refinancing. For more information, read about how to be credit savvy.

• Build Sweat Equity.

As money tightens up and real estate prices start to drop, you could wind up with less equity in your home while lenders are demanding more. One way to help offset dropping prices is to make inexpensive improvements to your home that appraisers will appreciate. You don't want to borrow money for this purpose, but doing some home improvement projects as you can afford them could make a huge difference later on. For more information, read about Sweat Equity.

• Find out what it takes to qualify.

Research lenders in your area. Talk to loan officers. Find out exactly what they require so you can start working on your loan right now. You may find out you need more income, less debt, better payment history, more time on the job, more assets, more or less credit. Whatever you need, the longer you have it, the better they like it, so don't wait.

• Start a savings account.

Most lenders also offer savings accounts. Many credit unions offer home loans. Start shopping around for a good company to refinance your home with. Talk to a loan officer and make sure you can qualify for their program, then open an account with them. Make regular deposits. Become one of their best customers if you can. The more you do for them, the harder they'll work for you when it's time to refinance.

• Timing is everything!

Pay attention to what's going on in the real estate and lending industries. Your goal is to refinance when rates are low and values are high. If these trends are moving against you, it could make things difficult. The more you know, the better prepared you'll be to make a move or dig in and wait it out.

Here are some news feeds to help keep you informed about what's going on in the world of real estate. (These links change daily, so you might want to bookmark this page.)

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Also keep your own needs in mind. If it looks like your payments will be going up before you're ready to re-fi, start saving money, now, to make up the difference.

If you're planning a job change or you need a new car, maybe you should refinance sooner, so these things won't show up on your loan application.

Watch for ads and offers. Shopping for money is just like shopping for anything else. You want the best deal, even if it means "buying" a little sooner or waiting a little longer. Don't get stuck with a bad loan because you didn't time it right.