Improving Your Refinancing Techniques
The first thing any borrower should do is keep abreast of what's happening with interest rates and the economy at large. While actual mortgage rates are set in the secondary market, it makes sense to pay attention to the monthly announcements by the U.S. Federal Reserve Board on where the Fed governors see the economy is going. The Fed doesn't set mortgage rates — its job is to assure the liquidity of the banking system and set rates that banks charge each other — but its bird's-eye view of the economy is a central influence on the markets that actually set the rates.
When you sell, remember that married couples can exclude from their taxable income up to $500,000 of gain, and individuals filing separately can exclude up to $250,000. Based on 2007 tax rules, it's required that you must have owned and used your home as your principal residence for two out of five years before the sale.
It's always critical to keep an eye on your credit report. You have the right to get all three of your credit reports — from Experian, TransUnion, and Equifax — once a year for free. Related to that, you always need to make sure your bill payments are current, particularly your existing mortgage and home-equity lines. If you've failed to make on-time payments of credit card bills, car loans, or your utilities, knock that off for good. Nothing will sink a credit rating faster than lackadaisical payments.
For some borrowers wanting to get rid of credit card debt and other excessive balances, your lender might want to set up a home-equity line of credit in addition to your refinanced first mortgage to pay off those extra bills. Make it a point to pay down that home-equity line as soon as you can, and don't use it as a fresh new piggy bank.
