1. Know yourself. Gather for yourself all the information that a lender will gather about you: your credit score and credit report; your debt-to-income ratio (the percentage of your income you spend on housing and loan/debt payments); and verification of your assets and income.

2. Know your mortgage. If you are refinancing your adjustable-rate mortgage, know when your rate is scheduled to reset and how much your payment will go up. If you are looking to take cash out, estimate how much equity you have - the difference between the market value of your home and how much you currently owe. (Remember to be realistic and not over-estimate.) Find out if your current mortgage carries a fee for paying off your loan early.

3. Know your options. Think carefully about what kind of loan is the best fit for you: a traditional 30-year fixed-rate or something like a hybrid ARM (an adjustable-rate mortgage with an initial fixed-rate term)? Crunch the numbers with our free mortgage calculators. Then, shop around for the best rate and terms on your new loan.

4. Know your limits. Financially speaking, that is. Make all your payments - not just your mortgage, but any other loans, utilities and credit card bills - on time, every time. Put off any big purchases, like a car or major appliances, until after your new mortgage closes. Check, and then re-check, the affordability of your new mortgage. If you are taking cash out of the equity in your home, make sure you can afford a larger payment. If you are refinancing into an adjustable-rate mortgage, make sure you have a plan for how to manage a changing payment.

Check your current mortgage.
If you have an adjustable-rate mortgage, find out when your rate and payment will reset. At current interest rates, how much will your payment go up? Can you afford it? Do you want to? If you refinance your current loan, will you have to pay a pre-payment penalty? If you are considering a cash-out refinance, estimate how much equity you have in your home.

Check your credit score.
Go to www.annualcreditreport.com and get your free credit report. It's also worth it to pay a fee to get your score. If your score is 760 or above, you should be in good shape, credit-wise. If your score is below 660, you may want to do a little credit repair before you refinance.

Check your debt-to-income ratio.
Along with credit score, debt-to-income ratio is another qualifying factor lenders use. Generally speaking, you should spend no more than 36 percent of your gross (pre-tax and withholdings) income on housing and recurring debt like car payments and other loans.

Check your loan options.
If you have an adjustable-rate mortgage, you might want the security of a fixed-rate mortgage. But if you are fairly certain you won't be in your home for longer than a few more years, a hybrid ARM might be the way to go, with a fixed-rate and payment for the first few years of the loan. These loans often come with a lower rate than a traditional 30-year fixed rate loan.

Check out the competition.
Shop rates and programs from different lenders to find the best deal for a loan that fits your needs.

Check your budget.
Make sure you can afford your new loan. Whether you are refinancing from an adjustable-rate mortgage to the security of a fixed-rate loan at a higher interest rate, or taking cash out of your home for a larger loan, make sure you can afford the increased payment.

Find out your credit score.
Go to www.annualcreditreport.com to obtain a free copy of your credit report. While you can get your report for free, it's well worth the fee to get your actual score. (You can get your score through the LendingTree credit monitoring service.) If your score is above 760, you are considered an excellent credit risk and may qualify for a lower interest rate. If your score is below 660, you may have difficulty obtaining a loan until you improve your score. If you fall somewhere in between, you may not have trouble qualifying, but you may pay more in interest than people with excellent credit.

Evaluate your finances.
In addition to your credit score, lenders also look at your debt-to-income ratio, which is a calculation of your housing expenses plus recurring debt payments as a percentage of your pre-tax income. Your mortgage payment, property taxes and insurance (but not utilities) should be no more than 28 percent of your gross income. Your total debt - housing plus any other loans, alimony/child support and minimum credit card payments - should be no more than 36 percent of your gross income.

Check the affordability of your refinance.
If your payment will go up, make sure the increase isn't going to put too much of a squeeze on your finances. Check your current mortgage to see if there is a penalty for paying off your loan early (some lenders consider a refinance a pay-off).

Shop around.
It's a good idea to get offers from multiple lenders and compare the interest rate, terms and fees. And let them know you are comparison shopping: this will give lenders an incentive to offer you their best rate and terms. Don't just accept a loan because a lender approved you.

Use it to buy a car. Depending on where interest rates are, a home equity loan or line of credit may have a lower interest rate than an auto loan. Let's say you are buying a $25,000 car and the financing company offers you a rate of 8 percent for five years. Your monthly payment would be about $507 a month. With a home equity line or loan at 7 percent, your payment would be $495. But even if the difference in the monthly payment is negligible, the interest you pay on a home equity loan or line of credit is usually tax deductible, so be sure to factor that advantage into your calculation.

Use it to pay for tuition. Even public universities are now costing around $50,000 for four years. If you find what you've saved for your child's college education is no where near enough, consider using your home's equity to make up the difference. It may not be as cheap as a student loan, but unlike a student loan, it is usually tax deductible.

The bottom line. Your home's equity can be used for any purchase or expense, small or large. However, a good rule of thumb is to use it for a large, one-time expense. And remember, it's your house that's the collateral - so if for any reason you fail to make your payments or default on the loan, you could lose your house.

Get informed. Forewarned is forearmed. Use our adjustable-rate mortgage calculator to estimate your new monthly payment. With that information you can review your options.

Re-budget. You may be able to swing the new payment by taking a look at your budget. Make a list of all your monthly expenditures and see where you can cut back. It's a good idea to plan for future payment increases and take action now to either afford or prevent them.

Refinance. One way you may be able to prevent your payments from rising is to refinance into a fixed-rate mortgage. There may be upfront costs involved - so be sure to plan for those as well.

Sell. Another way to avoid those increased payments is to sell your home. If you are in the unfortunate position of owing more than your house is worth, you may be able to work with the lender to "short sell", where you sell the house and pay the lender whatever you make. A short sale has a severe negative impact on your credit.

Negotiate with your lender. If you have fallen behind in your payments, call the lender as soon as possible. They may help you by developing a repayment plan, so be prepared to show them a budget and copies of your bank statements and pay stubs. Your lender may agree to give you payment relief for a few months until you get back on your feet; typically your payments will be even higher when you begin to make payments again in order to make up those missed payments. The lender may also agree to modify your loan. This works like a refinance, but without the fees.