Refinancing your mortgage could save you hundreds of dollars each month in housing expenses. Plus a better mortgage deal could mean paying thousands less in interest over the life of your loan.

Nine things to do before refinancing.On the downside, you could waste time and money if your refinance request doesn’t get approved. Before applying for a new mortgage, take care of these things on your refinance to-do list.

1. Figure possible savings of a refinance.

Do the math yourself or use an online calculator to compare current and
future payments. Determine the breakeven point based on closing costs. Find calculators at CNNMoney, Bankrate, and and here.

 2. Gather financial documents.

Financial DocumentsStart putting together financial information your lender needs to make an underwriting decision. Collect income tax returns, bank statements, brokerage statements, W2s, and paycheck stubs or payroll advice from the past one or two reporting periods. Gather details on any outside income, such as rental property income, along with debt associated with credit cards, student loans, and car loans.

3. Build cash reserves.

Set aside money to take care of closing costs. According to the Federal Reserve, many borrowers pay 3-6% of their outstanding mortgage principal in refinancing fees.Sure, you may be able to add some of those costs to your new loan balance. But you might be required to pay upfront for prepayment penalties on your current mortgage along with application, loan origination, inspection, and related fees for the new loan.

4. Freshen your outdoor and indoor space.

Refresh your space, outside and inside, to show its worth. Your lender will typically require either a full appraisal (with inside inspection) or a summary (aka drive by or exterior) appraisal.

Attention to your yard or acreage can influence its curb appeal and appraised value. Similarly, an updated interior, such as newly painted rooms or uncluttered areas, can mean a higher value.

5. Document home improvements.

Note any renovations, additions, or upgrades you have made since buying your home. Compile records on the cost of these improvements, if possible. This inside information may be useful to the real estate appraiser when calculating the value of your home.

6. Finish those renovations.

Home RenovationsIf you are in the midst of a remodeling project or major repair, now is the time to focus on getting things done. Completed updates can add value to your home whereas an in-progress project can detract.

A higher appraisal may help you qualify for the refinance plus get a more favorable rate. However, avoid borrowing money, maxing out your credit cards, or tapping a home equity line to finance their completion.

7. Monitor interest rates and nearby home sales.

Keep a pulse on interest rates, as getting a lower rate is most likely the driving reason for the refinance. When you are ready, you’ll be more likely to lock in a desirable rate if you have been paying attention to interest rate movement.

In addition, prices of homes recently sold in your neighborhood can influence your property’s value as they are often used as sales comps in a certified appraisal. Consider moving fast if your neighbor’s house has recently reaped a relatively high price. Avoid refinancing soon after the bargain sale of a neighboring house.

While you can’t control interest rates and home sales, you can control the timing of your refinance.

8. Clean up your credit.

Just as you would when applying for a mortgage on a new home purchase, check and correct credit reports when getting ready to refinance. Moves to improve your credit score and put you in a better financial situation are also helpful. Reduce non-mortgage loan balances and make sure your mortgage payments are current.

9. Find the right lender.

Locate a lender who is responsive, clear about requirements, and able to give you a competitive interest rate with the fewest fees. This process may involve getting a referral from a friend who has recently refinanced or selecting a broker with multiple lending connections. Get quotes from more than one lender, and choose the best deal, considering both immediate and longer-term needs.

The more prepared you are, the better refinance deal you can land.

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