If there’s one point we’ve been trying to hammer home these past few weeks in our blog entries, it’s that now is the time to refinance your home loan. With mortgage rates on the decline, more and more people are looking to refinance now while they have the best chance at it.
But what about those who have already tried and been turned down for refinancing? Here are some of the more common reasons consumers are turned down for refi options – and what they can do to overcome them.
You lack equity
Even if you’re not completely underwater financially, you could still be turned down for a refi if you don’t have enough positive equity among lenders. Remember, just as you needed enough funds for a down payment, lenders also like seeing you have money of your own tied to the house before they’re willing to look at approving a refi.
So how can you overcome this? Bring in some more money of your own to the table. Say your home is worth something in the neighborhood of $200,000, and you owe $190,000 on the mortgage. Your lender says he needs 10% equity for a refi, meaning if you can bring in an additional $10,000 you could reduce your loan amount to $180,000. Of course, that leaves you with the problem of coming up with that kind of money, but we’ve got a few tips for that as well.
You can also try an FHA loan if you are barely treading water on your payments. FHA loans only require a down payment of 3.5%, so there’s much less of a monetary pressure should you try that route.
If you’re refi application was turned down on account of your bad credit, you’re only option is to work to improve it as quickly as you can. Fortunately, this isn’t as daunting a task as it may seem – all it takes is time and patience.
Assuming you don’t have a major mark on your credit report like a lien or bankruptcy, most negative information on your report starts losing its grip after 2-3 years. Use this time to focus on paying your bills on time –consider calling your credit card providers to find out when they report your information to the bureaus every month, and adjust your payments accordingly to speed the process up a little.
Got some refi tips of your own to share? We wanna hear them! Give us a shout out in the comments!