With mortgage rates, dropping down to historic lows, more and more homeowners are looking to refinance their existing loan.

Mortgage Bankers Associations refinancing index tracked down the refinancing application volume that hit the highest levels in more than five years. Thus sudden rise of refinancing application is has boosted up due to the record low interest rates; 30-year fixed mortgages fell to an average 4.85% for the month of January this year.

However, though some borrowers will get to start saving some cash from these lower interest rates, not everyone can make real profits out of it. To better understand refinancing in this lower mortgage times, you need to first educate yourself about refinancing in today’s market.

You should realize that though the market offers attractive rates, you have to deeply analyze your financial state before you determine weather or not its the time for you to refinance. Thus, you should know what your percentage point break is. If your mortgage rate is a full percentage point or higher that current rates, then you should consider refinancing. If your rates are around 6% compared to current rates, then you should consider refinancing.

However, if you are stuck with jumbo loans, more than what mortgage giants Fannie Mae or Freddie Mac can afford, then you will be facing sharp higher rates, thus you should not consider refinancing in such situations. In addition, you should consider the fees associated with the refinancing. You should realize that though lower interest rates are profitable, higher fees amount considerably eats up your cash that you would in turn save. Thus when applying to refinancing you r loan, get to company that required lower fees.

Though millions of applicants look for refinancing, a chunk of applications will be rejected. Due to the intricate turmoil of economic crisis going around the market, most homeowners will not be approved for refinancing. Until homeowners meet the maximum requirements and criteria, their application will not be approved.

Homeowners need their FICO scores in today’s market. Though FICO scores of 720 is considered score to get lower rates in the refinancing market, a FICO 740 score is required in todays market to get lower rats of refinancing deals. Borrowers with less that 740 or 720 FICO score will be approved for refinancing loan, but will be facing higher rates.

Home equity is a significant factor to get refinancing in todays market. The real estate crash has made most homeowners to face negative equity in their homes, which is homeowners owe more than what their property is worth. In order to get best refinancing rates, you should present a document showing you have at least 3% equity in your home. Moreover, with a strong credit and a positive home equity, you need to show a highly organized document of your income and expenses to get qualified for refinancing.

Mortgage refinancing fees vary from market to market and borrower to borrower. There are usually three ways to pay the fees. Firstly, one can simply pay the total fees up front. Second is one can easily choose for higher interest rates that cannot pay the fees at once. The last option is to add the fees to the grand principal of the loan.

You final approach should be going around for a comparison-shopping. As you know market and lenders differ from place top place, find the best deal that will suit your  requirements. Be patient, and wait until the right market, right borrower and right deal comes at you reach.