What Does It Take To Refinance A Mortgage?

A borrower who wants to refinance a mortgage loan should prepare for the loan application in a variety of ways, but there are some important things you can assemble into a checklist to help you determine your readiness for the loan.

One of the first places to begin is to check the age of your current mortgage loan. This is not a big deal for borrowers who have been paying on their mortgage loan for years, but if your loan is relatively new and you are considering a refinance loan to get out of an adjustable rate mortgage once the teaser rate period has ended, you’ll need to make sure you have a minimum amount of home loan mortgage payments made before you can apply for a new loan.

For example, the minimum required number of payments on many government-backed home loans is six--you can’t apply for refinance loans before you’ve made six house payments in some cases.

Another thing to check--the timeliness of your loan payments. If you haven’t made all of your mortgage loan payments on time in the 12 months leading up to the new loan application you seriously jeopardize your ability to get a cash out refinance loan or streamline loan. Some refinance loans are made specifically to help borrowers avoid foreclosure and may be able to help the borrower get caught up on missed payments but you’ll need to discuss that option specifically with your loan officer.

You should check the bank’s FICO score requirements. Government loan programs like FHA and VA loans may or may not have a program-defined minimum FICO score (the VA does not, the FHA does) but your lender definitely will.

Also check your credit lines to see how much open revolving credit you have--can you reduce or eliminate credit card debt before applying for the new loan? That’s an important thing to consider for cash-out refinance loans where the new credit check is definitely required.

And finally, examine your credit report to make sure old or inaccurate data is not present--you won’t know without checking and that look could make all the difference between loan approval and loan application rejection.

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