Today’s low mortgage rates probably have you considering refinancing your home loan. But if you’re unfamiliar with the process, you may think it involves filling out some paperwork and then suddenly getting a lower monthly mortgage payment.

Not quite. If you’re refinancing for the first time, you’ll want to avoid these six rookie refinancing mistakes that could ultimately cost you in the long run.

ACCEPTING YOUR FIRST OFFER

Although competition among mortgage lenders is fierce, mortgage rates can still vary greatly from lender to lender. It can really pay to comparison shop. Even a small difference could shave hundreds of dollars off your monthly mortgage payments and tens of thousands of dollars over the term of your loan.

For example, if you borrow a 30-year, fixed-rate mortgage of $300,000 with a 4 percent rate, you would pay $1,432 per month in principal and interest, and you’d be forking over a total of $215,609 in interest. But if you borrowed that loan at a 3.15 percent rate, you’d pay only $1,289 per month and pay a total of $164,116 in interest — saving you more than $51,000 in interest payments over 30 years.

But don’t just focus on mortgage rates when comparing offers, says Todd Sheinin, a loan officer at Homespire Mortgage in Gaithersburg, Maryland. “[Refinancers] should also consider the closing costs involved and if the offer has them paying any points or not,” Sheinin says. Ask lenders to provide a loan estimate, which is a disclosure that lists the approximate fees you would be expected to pay.

Closing costs on a refinance run, on average, $4,345.

SHOPPING FOR TOO LONG

COVID-19 has created a lot of volatility in the mortgage market, and no one knows definitively whether rates will go down or up from here. Read: If you’re serious about refinancing your mortgage, you don’t want to waste too much time talking to a boatful of lenders. Consider soliciting quotes from three lenders and choosing from among the best offer you get.

OVERLOOKING REFINANCING COSTS

Mortgage refinancing isn’t free. Closing costs on a refinance run, on average, $4,345 for expenses such as appraisal, underwriting and processing fees, according to ValuePenguin. Note: Some lenders offer refinances with “no closing costs,” but they typically require borrowers to assume a higher interest rate. You can use a refinance calculator to get an idea of how much it would cost to refinance your mortgage.

And don’t fall for "teaser" rates, says Jordan Dobbs, senior mortgage banker at Rockville, Maryland–based Sandy Spring Bank. “These are rates that are advertised low, but often carry points or fees to get that rate,” he says.

NOT CONSIDERING YOUR JOB STABILITY

The coronavirus pandemic has taken a massive toll on America’s labor force. In this time of economic uncertainty, it’s important to take a sober look at your job security before you refinance. For one, there will likely be refinancing costs, as previously mentioned. And if you’re refinancing to shorten your loan term or change your loan type, there’s a possibility your monthly payment may even go up. “The last thing you want to do is end up locked into a higher monthly payment and then have something happen to your position or income,” Sheinin warns.

So if your field has experienced layoffs or if your employer is struggling financially, now may not be the right time to make a major financial move.

ASSUMING YOUR CREDIT SCORE IS UP TO SNUFF

While lenders are eager to fill demand for refinances, many are tightening their lending requirements, to protect themselves in these uncertain times. “Right now, due to COVID, the lending market has been changing rapidly and credit guidelines are very volatile,” Sheinin says. “Make sure you know exactly what your score is when shopping for your new loan so you can be confident the offers you are receiving back are as accurate as possible.”

And if you’re looking to refinance soon, don't open new lines of credit, make a large purchase, take on a loan, or move significant funds from one account to another so you don’t accidentally ding your credit score or hold up the underwriting process.

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