3 Reasons Mortgage Refinancing Applications Get Denied – And How to Prevent Them
Homeowners seek mortgage refinancing for a variety of reasons. Whether you want to lower your payments or take advantage of a better interest rate to pay off your loan faster, refinancing your mortgage can be a sound step in building a healthy financial future. But today’s banks and mortgage lenders have stricter standards than ever before. Here’s a closer look at three common reasons refinancing applications get denied and what you can do to prevent them.
Late or Missed Mortgage Payments
One of the first things a lender evaluates is ensuring you have a history of paying your mortgage on time and in full each month. If you’ve had periods where you’ve been late on mortgage payments, it’s important to establish at least one year’s history of on-time payments before applying. Be prepared to explain previous issues, such as unemployment or unanticipated medical expenses. Documentation may be required to substantiate your claims.
A Drop in Credit Scores
Has anything recently impacted your credit score? Lenders are requiring higher credit scores today to make loans than just a couple of years ago. A high credit card balance, late payments, or multiple inquiries for credit could negatively impact your score. Use a service like Freeannualcreditreport.com to obtain a copy of your report, and look for errors or issues that need to be cleaned up. A free service like CreditKarma allows you to see your credit score. Knowledge is power. Address any problems that arise before you apply.
Drops in Your Home’s Equity
One of the challenges of the recent housing bubble is that home values plummeted. Many owners found themselves under water. If you’re trying to refinance a loan that’s significantly higher than your home’s current value, you’ll need to look beyond traditional financing vehicles. Talk to a qualified lender about programs such as HARP, which allows you to refinance up to 125% of your home’s value. Another option is HAMP, a federal restructuring program, for homeowners that are both underwater and have missed payments.
Finding the right refinancing solution for your Las Vegas home starts with talking to an experienced loan officer. Contact Sydnee Johnson today to arrange for a personalized consultation and learn more about the options available to you for mortgage refinancing.