How to Qualify for a Mortgage Refinance
Refinancing your mortgage consists of applying for a new home loan, which pays off your old loan. There are several benefits to refinancing a mortgage loan. Borrowers who refinance can often receive a lower rate on their mortgage. Also, if you have home equity you can obtain money with a cash-out refinance. Keep in mind, getting a mortgage refinance involves repeating the mortgage loan process and qualifying for financing.
Reduce debt-to-income ratio
Owing a large amount of money on any one account (in comparison to the limit on the account) can impede your efforts to refinance your home loan. Mortgage lenders look for a debt-to-income ratio a certain percentage or less. Click here to ask what the debt-to-income ratio is for your area. In preparation for a mortgage refinance; pay down credit card bills and smaller installment loans to lower your debt and potentially qualify for a refinance.
Provide proof of income
You’ll need stable income from resources such as career, pension, incapacity and spousal support to acquire a new home loan. Contact a mortgage professional to see exactly what income guidelines will need to be met.
Have a reasonable loan-to-value ratio
To qualify for a refinance, your loan cannot exceed your home’s value. You will likely need to have a mortgage professional schedule a home appraisal to determine your home’s worth. Click here to submit a request to see if you are qualified to pursue a refinance first. That way, you don’t pay for an unnecessary appraisal. If you owe more than your property’s worth, postpone refinancing until you build equity or use your own cash as a down payment.
On a side note…
If you DO owe more than your property is worth, the HARP program may also be something you qualify for. It is the new government-sponsored, no appraisal, home mortgage refinance program for underwater home mortgages. The HARP program is available for Fannie Mae and Freddie Mac owned mortgages that were originated prior to June 1, 2009. Ask your mortgage professional if you are eligible for this program or click here to fill out a quick application and we will contact you to let you know if you’re eligible.
Maintain good credit
Keep your credit in mind at all times and when you’re ready to refinance, your credit will be where it needs to be. Pay your bills on time and don’t finance a significant purchase, such as a vehicle, until you’ve closed on your refinance. Your credit scores and reports – Your credit scores and credit history greatly influence whether you qualify for a mortgage refinance or not. Having a higher credit score definitely puts you in a good position of qualifying for a mortgage refinance. This however does not mean that a one-time high credit score will make you qualify. You need to have a constant high credit score to qualify.
Speak with a broker
Compare mortgage products by speaking with a mortgage lender. Get pre-approved to see what you can qualify for with your present income and credit score.
with contributions from A. Zac