In the old days of the mortgage industry, the cream of the crop mortgage program for brokers and loan officers was the refinance mortgage. Just about any loan officer back in those days made most of their money doing refinance loans. But today, with all the changes to the mortgage industry as well as the challenges we’ve had with the housing market across the US – refinancing ain’t like it used to be. Let’s look at a few ways that make refinancing difficult.
First up is the appraisal – Unless you are taking advantage of low streamline VA rates (and you have to have a VA loan to do this) you will most likely have the most difficulty getting your refinance approved because of your appraisal. This is especially true if you bought your home within the past 5 years with little or no money down. It’s a good bet that your value has gone down which could make getting a regular refinance a tough road. If you are facing a situation where you have to refinance – don’t let your ego get in the way of “your home” being so nice that it “really” is worth more than your neighbors. The appraisal is based on what homes are selling for that are comparable to yours. If they are selling for less than what you think yours is worth – chances are your value will come in under what you think/want/need it to be.
Home Repairs in Mid Stream – Speaking of the appraisal, you do not want to have home repair projects underway while you are in the process of trying to refinance – unless you are trying to get perhaps a rehab refinane loan for FHA or VA. The appraiser will note the work in progress and they could potentially down grade the value of your home. Also, with unfinished spaces in your home, the mortgage approval could be in jeopardy because no lender wants to put money out there for an “unfinished” home. You will either want to get the work done way in advance or wait until the refinance is completed.
Changing Your Credit Profile – This is a super common mistake many homeowners make as they go for a refinance. If you are in the market for a refinance, you should not do any huge credit changes like making a bunch of new charges on your credit cards unless it is normal for you to do so every month and pay them off. If you don’t do this and you all of a sudden decide to charge a bunch of building materials for example just before you go in for your refinance you will probably be surprise at what happens to your “used to be wonderful” credit score. You will also not want to finance a new car within 3-6 months of applying for a refinance. This can also hurt your scores to the point of it getting in the way of your loan approval.
These are some of the common ways to mess with your chances of getting a refinance approved. Best thing to do is speak to a few loan officers to get their thoughts on your refinance changes. You should also find a real estate agent to give you their assessment of your home’s value. They can get pretty close because they can look up sales near and similar to your home.
With all this in mind, refinancing can be a breeze if you fit nicely into the loan requirements for the program you want.