Home Refinancing Help
- You want the highest credit score possible to refinance a mortgage. Request your personal credit score from MyFico.com. There are several reasons to wait until you score reaches 740 before applying for a refinance. Scores within this range or higher qualify you for a loan; plus, the higher your credit score, the better your odds of getting a low-rate mortgage loan.
- Losing a job isn't the right time to look into refinancing options. Yes, a refinance can help lower your rate and payment. Lenders need to see consecutive employment, however, and an income source. Being without employment or a drop in earnings will affect your ability to refinance. To see if you qualify, lenders review paycheck stubs, bank statements and tax returns from the past two years.
- Another factor affecting home refinancing is equity. Not everyone can get a mortgage refinancing. Understandably, owners wish to take advantage of dropping mortgage rates. Owing more than a home is worth, however, or having little equity in a property may prevent a home loan refinancing. As a rule, conventional loans require a minimum of 20 percent equity. Owners with less equity can look into FHA loan refinancing, as long as there's at least 5 percent equity in the property.
- A clear goal in mind helps when refinancing a mortgage loan. Closing costs are fees connected with each mortgage loan, including refinancing. Fees can costs up to 6 percent of the loan balance. Because of the costly nature of refinancing, it's smart to refinance only if you're trying to achieve a goal such as acquiring a better rate to lower your present mortgage payment, or perhaps switch to a fixed-rate mortgage to alleviate rate and payment adjustments with an adjustable rate mortgage. Refinancing is also effective for cashing out your equity and receiving money for renovations or debt consolidation.
