People getting the perfect conventional, FHA and VA mortgage rates is like hitting the jackpot when it comes to property investment. However, not everyone is as lucky to receive the deal they prefer due to various reasons. In time, they can go for refinancing to change their current loan terms or type.
Refinancing has its different eligibility requirements, which vary across loan types and lenders. The following are the common eligibility requirement a borrower should meet to refinance their home loans.
Refinancing is similar to loan application. Borrowers need to undergo another assessment to see if they can refinance. Among these assessments is checking their credit scores and compare them with their previous reports. Credit scores can dictate whether an applicant can get better interest rates or not on their new loans. Individuals who improved their credit scores since their previous application have the chance of reducing their interest rates and save money. Otherwise, applicants will get higher interest rates once their new loans have been approved. This highlights the importance of improving or at least maintaining credit scores at all times, especially if the borrower wants to change loans.
Income and Assets
Aside from credit scores, lenders and brokers will also check the applicants’ current finances. A person’s income and asset could’ve significantly changed since first loan application and may be eligible with other advantages the new loans can give. Individuals with new assets without incurring significant loans from other entities may take advantage of better interest rates. This is because their wealth or financial profile improved, making them eligible for benefits that some high profile clients can take advantage of.
Loans incurred will also be assessed. Lenders would like to know if their income-to-debt ratio increased or not. This will let them know whether the applicant has been handling his finances properly and be able to pay the refinanced loan.
This second round of assessment may sound worrisome for borrowers. However, they should not worry as much if they managed to maintain their previous financial profile. Lenders would want to keep their clients rather than lose them to another loan provider. These assessments are only part of the formalities for refinancing and won’t require other complicated procedures for applicants to get their loans.
Current Property Value
Appraisal is also a part of the refinancing process, although some lenders may skip this part. Lenders will check out if the property’s value increased or decreased compared to their previously owned mortgage. If the value of the house to the loan ration doesn’t meet the lender’s refinancing standards, then they won’t push through with the refinancing process. Or if they do, lenders may give deals that won’t play to the borrowers’ advantage. Since this part is crucial, borrowers should ensure they’re working with trusted lenders offering refinancing for conventional and VA loans. They will accurately derive the property’s value by working with a certified appraiser.
Lenders won’t typically look for borrowers’ money for refinancing. However, money is vital for borrowers to check because they can deal with the expenses that come with refinancing. Refinancing comes with new fees like application fees, title search fees, attorney fees, loan origination fees and a lot more.
Application fee are charges imposed by lenders as part of their assessment and processing procedures. This fee may vary depending on the lender and its offered deals to buyers. Some lenders may offer this for free, but generally they ask for this fee as they are entitled to do so.
Other fees include services of other entities like lawyers, insurance experts, and others. They have their own prices and vary according to their offered deal.
People considering refinancing should be prepared with all these fees to avoid messing up their budget. Borrowers who don’t have sufficient funds can save estimated amount first to ensure they have the money to continue with the application.
Completed Mortgage Term
Refinancing requires a person to stick to their current mortgage for a specific time before refinancing. Lenders typically ask for borrowers to stay with their previous loans for a year or so before refinancing. However, borrowers should check their specific lenders’ terms. Some lenders may ask longer period of paying their mortgage before allowing refinancing. This information is often available at lenders’ websites or by inquiring them through their contact information.
Refinancing has its advantages. Using a home mortgage loan calculator and knowing these usual eligibility requirements will prepare borrowers with the process then enjoy the benefits once they are approved for refinancing.
Max is a native Phoenician who is working as one of the stuff at The Eddie Mortgage Team with over a 6-years of experienced as SEO Specialist.This author has published 5 articles so far.