How to Refinance in the Current Market
As of mid-2009, the mortgage market began tightening restrictions and making mortgage refinances harder and harder for borrowers to procure. New documentation requirements, as well as stricter appraisal requirements, make the process harder than it was just a few years earlier. With some basic preparation and knowledge, however, a borrower can refinance in the current market.
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Things You'll Need
- Uniform residential loan application
- Bank statements
- Pay stubs
- Income taxes
- Appraisal
Instructions
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Check your credit report prior to applying for your mortgage refinance through a website, such as AnnualCreditReport.com. You are entitled to one free credit report per year through this service. However, additional credit reports as well as your credit score require a fee payment. The site requires the disclosure of your full legal name, date of birth, Social Security number, and a credit card number to verify your identity.
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Check your credit report for errors and report any immediately to the website. Additionally, check for any negative items such as bankruptcies, judgments and liens. In order to qualify for the refinance, each of these items must be paid in full. Documentation of this full repayment will be required.
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Fill out a Uniform Residential Loan Application with a mortgage lender. Required information includes full legal name, date of birth, Social Security number, residences for the previous two years and employment history.
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Provide your lender with a minimum of two years' tax returns, two months of bank statements, and two months of pay stubs. Allow the lender to purchase an appraisal on your property, as well as check your credit and process your application.
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Sign and date all applicable disclosures given to you at the end of the application process. Provide the lender with any additional documentation requested, including but not limited to divorce decrees, retirement account statements, and Social Security statements.
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Sign and date all paperwork at the closing table to complete the transaction.
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Tips & Warnings
If you are concerned that the value of your home has declined in the current market, consider one of two options.
First, contact your current lender to see if mortgage modification is an option for you. In this case, the lender lowers the interest rate and/or payment with refinancing the debt.
Next, consider a Making Home Affordable refinance, a program made available in mid-2009 by the Obama administration. This gives borrowers with mortgages that are up to 125 percent of the value the option of refinancing their debt.
The hardest part of the mortgage transaction for most borrowers is the appraisal process. With the appraisal, the appraiser looks at comparable properties, as well as the market as a whole, to determine the value of the property. If the comparable properties do not meet the lender's standards, or the market in that area is marked as "declining," it is very hard for that borrower to purchase a mortgage refinance.
References
- Photo Credit home sweet home image by David Dorner from Fotolia.com
