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It can be difficult or even impossible to get the best refinance rates when refinancing your home if you haven’t taken the proper steps before applying. Getting the best rates is very important because over time, an interest rate that is half a percent lower than another can save you thousands or tens of thousands. Below is a guide of the most important steps to take when refinancing your home – before you apply for the loan.

1) Improve your personal credit score. This is one of the most important factors lenders look at when determining the interest rate on any type of loan. In the mortgage industry, it is especially important. Since all of the troubles that have occurred in the mortgage industry lately, the rules have changed. Previously, a credit score of 700 or more was considered stellar. Today, stellar credit is considered anything over 740. Visit a credit counselor to help you accomplish this score. Be warned, it could take a long time.

2) Improve your debt to income ratio. This is a number that the lenders rely heavily on to determine whether or not you are safe to loan money to. It shows them how much money you make, and how much you owe out every month. It gives them an idea of how able you will be to make timely payments on the loan. This is a big factor with cash out refinances where you are getting a lump sum of cash using your home’s equity for collateral, that may raise your monthly payment.

3) Equity in your home. Ask your mortgage broker to run numbers on different scenarios. If you had more equity in your home, how would that change the numbers. If you are in a financial position to pay more off on your home before doing the refi, do the research necessary to determine whether or not it would make financial sense to do so.