With today's stellar mortgage rates, many people are lining up for a mortgage refinance. Before you fill out that mortgage application, however, there are a few items to consider as you prepare to refinance your home loan.

Interest rates are at historic lows, and it's the government's intent that the rock-bottom rates will prompt more people to seek a mortgage refinance. These hopes are slowly being realized, as a mortgage application is no longer something to be afraid of. More and more people are returning to lenders to refinance their homes.

The lending landscape has changed, however. The days of automatic approvals are a thing of the past. Today, there are a number of things to consider before you fill out that mortgage application.

Refinancing mortgage loan? Check credit and home value first!

During the recent hey-day of the mortgage refinance boom, lenders were approving almost every application that came across their desks. This type of behavior led to the massive housing bust, mass foreclosures, and the banking system bailout. Those days are over, which means consumers can't expect an automatic loan. So, before you even visit a lender or check out a rate, review your credit score. Lenders have become hesitant to lend to people who pose a credit risk. If your score is too low, scratch "refinancing mortgage loan" off your to-do list. Instead, stabilize your spending and wait until your credit score starts to climb.

Your home may have also decreased in value to the point where you don't have enough equity to refinance your loan. Eventually, those home values should rebound but, for the time being, you may have to sit this refinance boom out.

Get your paperwork together

The low interest rates are definitely a draw for homeowners. However, they shouldn't be the sole driving force behind a mortgage refinance. Consider your rate and term. If you have a slightly higher interest rate, for example, but can pay off your loan in two or three years, a lower mortgage rate might not allow you to recoup your costs.

The length of time you plan to stay in your current residence should also be a consideration. Why get a 30-year fixed rate mortgage if you're going to move in five years?

If you decide to pursue a refinance, make sure your paperwork is in order. Lenders today are more finicky than ever, and they'll be looking for documentation on your income, your taxes, and other financial details. Having your information in order will help speed the process, and allow you to lock in a great deal on a moment's notice.

The mortgage refinance is quickly returning as one of America's great opportunities. Before you fill out a mortgage application, remember that times have changed. Review your credit score, your home's value, and personal goals before you decide to join the stampede to your local lender.

Published on November 27, 2006