Refinancing your mortgage in this economy can be difficult, but it is not impossible. Between tight credit markets and so many homeowners being underwater, it can be hard to refinance home loan. With the record low interest rates currently available however it is definitely worth it to put up with a small amount of hassle.
Where to Start
Qualifying for a refinance home loan in today’s market is a lot harder than it was a few years ago. Under the old rules, practically anyone could qualify to refinance their mortgage regardless of cash on hand or credit score. Today, most banks require candidates to have a great credit score, a lot of equity in the property they want to refinance, and an excellent payment history.
Fortunately, there are ways around some of these requirements. To start, get a copy of your credit reports and review them for any errors or bad information. Correct any bad information. Having a good credit score will qualify you for the best loan rates.
Next, do some research about the value of your home. According to the Department of Housing, about twenty-five percent of homeowners are underwater on their current mortgage. This means that they owe more than their home is worth. If you happen to be one of them, refinancing will be very difficult. Many banks will refuse to even consider an application on a home that is underwater. Other banks will consider refinancing if you meet the conditions of one of the several different HAMP programs instituted by the federal government. If you do not qualify, you may have to bring money to the closing table in order to complete a home refinance.
Why Get a Refinance?
With so many issues to work through, a lot of people wonder if they should refinance. According to bankrate.com, the interest rates currently being offered on thirty year mortgages are the lowest ever offered since these rates started being tracked. This means that refinancing could potentially save you thousands of dollars over the life of your loan.
Furthermore, refinancing means that you will typically have a lower monthly payment than you are currently paying. This can mean saving hundreds of dollars a month, or being able to pay off your mortgage years earlier than you thought you could.
Ultimately, the process to refinance a mortgage can be difficult, but the low interest rates available make it worth it.