Refinance Home Loan: Is It Another Mortgage Option?
Over the past few years, mortgage interest rates have continued to decline to their lowest point ever, which has made refinancing a great option for many people. However, for some, refinancing is not an option. To determine if refinancing is an option for you, there are a few different factors to consider.
Do You Have Equity
The first factor to consider when determining if you have the option to refinance home loan would be if you have equity in your home. To refinance your mortgage, you will need to have at least 10% equity in your home. While you may have initially put down a sizable down payment, declining home values have resulted in many people losing their equity in their home. To determine whether you have enough equity, you will need to get an appraisal.
Is Your Credit Good
The second factor to consider when determining if you have the option to refinance home loan would be if your credit is good. Due to the high rate of mortgage defaults, mortgage lenders are now putting a much higher emphasis on a borrower’s credit score when determining if they qualify for the loan. To qualify for a mortgage refinance, your credit score will need to at least be 680 and to get the best rates you will need a 740.
Can You Afford the Payment
The third factor to consider when determining if you have the option to refinance home loan would be if you can afford the monthly payment. Mortgage companies have also put far more emphasis on a borrower’s ability to afford the monthly payments. To get comfort that the borrower can afford the payment, the lender will verify that their debt to income ratio, with all housing payments, will be less than 30%.
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