Private mortgage insurance (PMI) can be an expensive requirement for your home loan, as it adds more to your monthly payment costs. This is a safeguard that your lender will take out to cover a portion of the amount you borrowed in case you default. Up Next: P.I.T.I.: Understanding The Parts Of Your Mortgage Payment […]
4 Reasons You Cannot Refinance Your Home
Refinancing your home is a financial strategy that can save you money when done at the right time. Refinancing is the process of revising your mortgage rate to that of the current environment, saving you money over time.
When you apply for a refinance for your home but are rejected, know that it isn’t uncommon. With the right steps and patience, you can get your home refinanced. Here are the most common reasons you cannot refinance your home and how you can fix it:
You Lack Home Equity
To refinance your home you need to have lived in your home long enough to have built up your home equity. The reason being, when you refinance your home that equity you have built up is used as an asset.
If you have been denied a refinance because you lack home equity, stay in the home for a few more years and avoid using your home’s equity for lines of credit to fund that home improvement project.
Your Credit Score Is Too Low
As with all home loan transactions and your mortgage you must have a good credit score. If it is too low, you cannot take advantage of the benefits such as being able to refinance your home loan. A good credit score shows lenders that you have the ability to repay your debts on time so take steps to improve your credit score such as paying all debts on time, and reviewing your credit report for errors.
You Make Late Monthly Mortgage Payments
If you make your monthly mortgage payments late or miss them, it will work against you when you seek to refinance your home loan. Lenders will see your late or missed payments and consider you a risk.
Be sure to make your monthly payments on time so you don’t fall behind and default.
You’re Close To Paying Off Your Mortgage
If you’re close to paying off your mortgage there really isn’t much point in refinancing your home. When you refinance your home, you are essentially getting a whole new mortgage and extending the life of your loan. If you have only a few months or a year or two left of payment on your current mortgage it’s not a good idea to refinance.
Remember that when refinancing your home you need to be able to afford all of the associated costs, including application fees, closing costs, and loan origination fees. A SmartMortgage lender is always more than happy to help guide you through the refinancing process and