Tips to Help Qualify for Refinancing a House

Depending upon if you purchased your home, refinancing it could possibly be a wise move for your monthly income stream. Lenders are eager to work with customers who already have equity in their homes and can often help homeowners restructure their mortgages to allow for reduced premiums in addition to a lump sum of cash that could be necessary for a new car or home repairs. There are several things homeowners can do in preparation for meeting with a potential lender. Doing so work up front will help speed up the refinancing process.

Credit History

Receive a copy of your credit report from each of the 3 credit reporting bureaus. When there are lots of companies offering free credit reports, they will provide you with all the report just, but maybe not your score. You’ll have to pay for the score (about $9 for each agency). For better or worse, the principal determinant for whether a lender will give you a loan to refinance your house is your own credit history. If you have good credit (i.e., your score is over 620), you will almost certainly have very little difficulty getting the refinancing. If your credit is not as good, you will have to take some actions up front to make up for the lower credit score. Review your credit report and correct any mistakes on them. You do this by phoning the reporting agency; they will outline a procedure you have to follow to get the report amended. Be mindful that the procedure usually requires documentation of paid debts that are listed as outstanding. The practice of revising your credit reports can take months, so get your scores and reports whenever you can, even if at this stage you are simply contemplating applying for refinancing.

Documents

Once you’ve your credit scores and reports, in addition to any documentation that refutes those reports, you can set up an appointment to speak with a potential lender. The lender, along with a credit history, may want to see copies of your last three federal tax returns. While the lending company is interested in your credit history, what he is even more interested in is what your history was like during the previous 2 years. Even if your credit report reveals many late payments, as long as your recent history has been good, you are in a stronger position to get financing. Similarly, make certain to inquire about refinancing with your existing lender. If you’ve been present with your mortgage, the lender of that mortgage will probably be more inclined to grant an exception for you for poor credit, even though you’ve been late on payments to other debtors. Along with viewing your credit history, lenders like to see that you bring in regular income. This is particularly true for independent contractors like consultants or artists. Gather together a year’s worth of pay stubs and work contracts, and notices about potential contracts. If you are divorced and receiving alimony, make certain to bring a copy of your settlement agreement, showing the amount of regular alimony you get.

Home Appraisal

Before seeking refinancing, get your home professionally assessed. If the property has appreciated in value since its final appraisal, you are in a stronger position for refinancing, ever since your equity in the home has increased above the equity part of your present mortgage obligations.

Co-signer

If you’ve got poor credit, think about approaching a lender with someone who has strong credit and is prepared to become a co-signer with you. This will most likely be a family member (parent, spouse, grandparent, etc.) who understands your situation and thinks you will not default on the loan. Most lenders have a look at the credit ratings of each co-signer and then base their choice on the highest score.

See related