How to Qualify for a Mortgage Refinance
Refinancing your mortgage lets you apply for a new home loan, which pays off your old loan. There are several benefits to refinancing a mortgage loan. Borrowers who refinance can often receive a lower rate on their mortgage. Also, if you have equity in your home, you can obtain money with a cash-out refinance. Unfortunately, getting a refinance involves repeating the mortgage loan process and qualifying for financing.
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Instructions
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Reduce debt-to-income ratio. Owing a large amount of money can impede your efforts to refinance your home loan. Mortgage lenders look for a debt-to-income ratio of no more than 38 percent, says Lending Tree. Pay off credit card bills and smaller installment loans to lower your debt and qualify for a refinance.
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Provide proof of income. You'll need steady income from sources such as employment, retirement, disability and alimony to obtain a new mortgage loan. Bring in or fax copies of your tax returns (two years if self-employed) to your broker or lender.
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Have a reasonable loan-to-value ratio. To qualify for a refinance, your home loan cannot exceed your home's value. Schedule a home appraisal to determine your home's worth. If you owe more than your property's worth, postpone refinancing until you build equity or use your own cash as a down payment.
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Maintain good credit. Keep a high credit score to acquire a new home loan and a reasonable rate. Pay your bills on time and don't finance a major purchase such as an automobile until you've closed on the refinance loan.
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Speak with a broker. Compare mortgage products by speaking with a loan broker or mortgage lender. Get pre-approved to see what you can qualify for with your present income and credit score.
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Tips & Warnings
To calculate your debt-to-income ratio, divide your total debt payments (minimum monthly payments) by your monthly income.
