Whether or not you can get a home loan refinance depends on three things: your credit history, how stable your income is, and how much equity you have in your home. Find out more about these things by reading on.
Before you can get a home loan refinance, most lenders will check to see if you qualify for the loan. Expect them to look at your credit history and ask you for proof of your income, your ability to pay back the loan, and your collateral. So, to save you time, here are some guidelines that will help you figure out if you can refinance your home or not.
The record of your credit
You probably already know that your credit history is a big part of whether or not you can get a loan. If you want to refinance your home loan soon, make sure everything is in order with your credit score. The better your credit history and score, the easier it may be to get approved and even easier to get a good rate. But don't think the wrong thing. Even if someone has bad credit, they may still be able to refinance, but the interest rates may be high.
If you are planning to refinance your home loan soon, you should also get a copy of your credit report. Find out where you are right now and look for ways to improve your records. Try to find a way to pay off your credit card debt, avoid taking out new loans, and pay off all your smaller debts. No matter how tempting it might be, don't open a new credit card account because it will only add to your debt.
Your job or how you make money
Most of the time, lenders like people who have steady jobs or income. Keep in mind that lenders are in the business of making money, so if you want to refinance your home loan, they will only work with people who pay their bills on time. Because of this, they usually don't want to work with people who change jobs too often or charge them more to make up for the risk. You will be able to pay off your debts if you have a steady income. The loan you can get will be bigger the more money you make.
Here is how most lenders figure out if you are a low-risk borrower or not. They look closely at your income and figure out how much of it goes toward your monthly payments and other debts. If your monthly income is more than 38 percent of what you owe, you may be a good candidate for a loan.
Your home equity
To put it simply, home equity is the difference between how much your home is worth and how much you still owe on your mortgage. As the value of your home goes up, you get closer to being able to pay off your mortgage loan. The amount of money you can borrow to refinance your home loan depends on how much you still owe. Keep in mind that most lenders will only let you borrow up to 80 percent of your current balance.
Save yourself and your lender the time it will take to evaluate. First, think about your money and keep these three things in mind. If you meet the requirements, go ahead and refinance your home loan with a reputable mortgage company.
