With the mortgage meltdown underway in full swing you might think getting a mortgage even with good credit would be difficult. This isn’t necessarily the case.
The problem many homeowners face when refinancing their mortgages is that home values are declining.
If you’re upside down in your home and struggling to refinance there are options available to get you the help you need. Here are several tips to help get you approved when refinancing your home loan.
Why Mortgage Applications Are Denied
Many mortgage brokers these days are closing as few as one out of ten loan applications. The majority of these denials are related to the home and not the borrower. This means the loan-to-value ratio for many borrowers is too high or they are upside-down in their property. Being upside down simply means you owe more than your home is worth.
You might hear that people are being denied mortgage loans because of the credit freeze and this simply isn’t the case. The credit freeze you hear about in the news is because banks have stopped lending money to each other for fear of bank failure and has nothing to do with consumer lending or mortgage loans. There are mortgage loans available and you don’t necessarily need stellar credit to find one.
What To Do If Your Application Is Denied
First of all don’t take it personally…it’s discouraging to have your mortgage denied but the first thing you need to do is look at the big picture. What is your credit score? Have you checked your credit reports for inaccuracies? Spend an hour going over your credit reports from the website AnnualCreditReport.com. It won’t cost you anything and if there are mistakes in your credit file you can bet they are dragging down your credit score.
Next, look at your qualifying ratios. These are your debt-to-income ratio and the loan-to-value ratio of your home. Are your monthly bills too much compared to your monthly income? If so what can you do to payoff or consolidate this debt to bring your debt-to-income ratio back in line? When was your home last appraised and how much do you owe compared to its value?
Mortgage Brokers Can Help
A good mortgage broker can advise you on improving aspects of your application and can place you with loan programs tailored to your individual situation. You have to be careful when working with a mortgage broker, especially in today’s climate, because brokers work for a commission. Loans that bring your broker the best commission probably aren’t the best loans for your situation.
Mortgage brokers can also markup your mortgage rate to get a commission from the lender. This commission is called Yield Spread Premium and according to the HUD Secretary is responsible for Americans overpaying nearly sixteen billion dollars every year. You don’t have to fall victim to this unnecessary markup of your mortgage rate…learn how to recognize the markup and find the right mortgage broker and you can save yourself thousands of dollars every year.
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Denied refinance loan (for a fixed) — self employed income showed to low on tax return (too many writeoffs). Holding a 479,000 loan (5-yr variable — currently 5.875). Self employed. Credit Scores: high 700's. Wanted to pay down jumbo to a conforming loan (225,000) taking money out of another investment property (existing loan of 185,000– fixed rate)
Property 1: appraised 1,2 million
Property 2: appraised 800,000
Worried about variable rate change in 3 years and wanted to change
this loan to a fixed. Have good savings also. Any ideas?