If you’re considering taking advantage of today’s low refinance mortgage rates, there are several roadblocks that could prevent you from qualifying. Your home’s loan-to-value ratio and credit status all weigh heavily on your application for mortgage refinancing. Here are four costly roadblocks you’ll want to avoid when refinancing your home loan with one of the top mortgage lenders like Amerisave.
Your Mortgage Loan-to-Value Ratio
One of the most common reasons for having your mortgage refinancing application denied is not having enough home equity. If you’re underwater in your home and your loan-to-value ratio is higher than 125% it will be difficult to refinance, even under the government’s old HARP program. The new HARP 2.0 should be widely available by the first quarter of 2012, which will not have loan-to-value requirements, meaning homeowners who are underwater in their mortgages now will be able to take advantage of today’s low refinance mortgage rates.
Your Mortgage Loan is too Big
If you’re currently paying on a jumbo mortgage loan and you don’t have superb credit you may find mortgage refinancing is out of reach. If your current mortgage balance is more than $417,000 your loan is most likely categorized as jumbo. If you find your application is denied because it falls outside the conforming loan limit of $417,000, you may still be able to qualify for mortgage refinancing by paying down the balance (cash-in refinancing) below the limit. This will also lower your loan-to-value ratio and the mortgage refinancing rates that you’ll qualify.
Bad Credit Mortgage Refinancing
Another common barrier to mortgage refinancing is your credit score. One of the most common mortgage mistakes is neglecting to check your credit reports for mistakes before applying. If your credit score is less than 620 you could have problems getting your application approved. Depending on how close to 620 you are after getting approved you may find the refinance mortgage rates you’re being quoted are much higher than what lenders are advertising. If you have less than perfect credit you may find an FHA mortgage is more accessible and can get you approved for mortgage refinancing. You won’t qualify for the rates you’re seeing on television; however, your payment could still go down based on getting approved.
Lack of Documented Income
If you’re self-employed or have lost part of your income, lenders could deny your application for a new home loan. Stated income mortgages are a thing of the past which makes mortgage refinancing for the self-employed extremely difficult. If your application for mortgage refinancing is denied because of your income a co-borrower could get you approved. You might also try shopping around for another lender with different underwriting requirements.
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