What Lenders Check When You Apply to Refinance Your
To be on the good side of lenders, you have to know what they look at when you
are applying to refinance your home. The most common mistake of some
property owners is applying without knowing what lenders want to see. As a
result, they are not able to prepare properly for the application and end up getting
higher rates and not so good terms. To avoid this, be prepared with the following,
as lenders will scrutinize it.
Lenders such as Benchmark Mortgage will ask for your credit report. Those
who have a credit score of 740 or higher are usually those that get awarded with
good mortgage rates. However, you don’t have to be on that range to get
approved for refinancing. As long as you have a credit score of 680 or higher,
these lenders will already see that you deserve to get approved.
Every home loan lender follows a procedure before refinancing. Part of these
procedures is to get a property appraised to check home equity. The minimum
home equity requirement for a conventional home loan is 20%. On the other
hand, FHA (Federal Housing Administration) home loans only have a minimum
home equity requirement of 5%.
When you have several loans and have high credit card balances, lenders will
not look favorably on you. It can end up affecting your application for mortgage
refinancing. This is because if you have too much debt, it will increase your debt-
to-income ratio. To be favorable in a lender’s eyes, your monthly debt payments
should be kept less than 28% of your total gross monthly income. If this is true
for you, then click here to see better rates and terms for refinancing your
Lenders have to make sure that you current income is enough for you to be able
to make payments. This is why they would ask you for your recent paycheck
stubs or recent tax returns. A decrease in your earnings or when you become
unemployed or divorced will not look good on the lender’s eyes. This is because
they take it as an indication that you may not be able to pay them back.