Refinancing Guidelines

Many homeowners look forward to starting the refinancing process when interest rates have fallen, as they expect their mortgage payment will be lower once the deal is complete. This is usually true; however, refinancing is a multistep process, and homeowners should be aware of some guidelines involved in the refinancing process. The mortgage lenders at Supreme Lending in Allen, Texas, can walk you through the steps.

Applying for a Refinance

The process for applying for a Refinance loan is similar to the way you applied for your original home mortgage loan.

A refinance is replacing your current home loan with a new home loan, so you will need to qualify all over again. If any of your circumstances have changed — job loss, reduction in income, increase in debt, drop in credit score — this can affect your ability to qualify for a refinance.

One of the benefits of already owning your own home is that the amount you owe may be much less than it was when you originally bought the house. In this scenario, you may be able to borrow a smaller amount of money, or you may be able to cash-out some of your home’s equity.

Home Appraisals for Refinances

A home appraisal is usually part of a refinance. That’s when a certified appraiser comes into your home to assess its condition and worth. Your home may be worth more than when you bought it, and an appraiser will consider current values of similar homes in your neighborhood.

If you have been unable to keep up the home adequately and there are issues such as structural or water damage, this will impact your home value.

Even cosmetic issues such as clutter, dirt, peeling paint, an untended yard, and anything that detracts from the value of the home can affect the appraisal. Therefore, if you have an appraisal scheduled, it’s a good idea to make sure your home is as clean and tidy as possible.

Other Financing Guidelines

While there is no specific rule about when you are allowed to refinance a home, generally refinancing is not done within the first year of owning a home. Mortgage lenders may also be looking for more than 20% in home equity when considering a Refinance loan.

Rules vary for the type of mortgage you have and the type you are applying for. You likely will need a higher credit score for a Conventional mortgage than for an FHA or VA loan. VA and USDA loans also may scrutinize the condition of the home more closely.

Remember that you will usually have to pay closing costs again. This is often 2%-3% of the amount of the home loan. However, this cost can often be rolled into the new mortgage.

When you’re considering refinancing your mortgage loan for your home in Allen, Texas, work with the area’s preferred mortgage company: Supreme Lending.