Refinancing your property while interest rates are low can save you money by locking in the low rates over a fixed period of time, 15, 20 or 30 years. The fixed rates provide another bonus, as when the economy rebounds, you would be in a better position to have affordable monthly payments.
In order to refinance your home, you need to meet the mortgage lender’s qualifications. Most lenders will require the following to approve the new loan:
- Good credit score;
- Sufficient income;
- Low debt-to-income ratio;
- A record of making your mortgage payments on time.
Even if you are self-employed, this is not necessarily a deal-breaker. Many lenders will now extend loans to self-employed individuals, as long as they can provide sufficient documentation to show you meet the same “good credit risk” requirements as salaried employee applicants.
Unfortunately, because of the recent housing crisis, lenders are more cautious when deciding whether to extend loans to consumers, including allowing refinancing deals. They are strict about requiring documentation and will only approve those applicants who truly meet the criteria.
For example, an average credit score would have likely qualified for a loan, a few years ago, but some lenders are now insisting on a score of 720 or above. In addition, tolerance of an occasional late mortgage payment or two is now a thing of the past.
If you want to refinance your home but are unsure if you will qualify, consult with an attorney who has experience to help guide you through the process.