Homeowners with existing mortgages refinance their mortgage for a multitude of reasons. The borrower must qualify by meeting the minimum requirements for the selected mortgage. Lenders must complete a full credit assessment and verify the borrower’s income and employ as if they are applying for a new loan. Examining the standard requirements for refinancing shows the borrowers where to start. 

The Borrower Must Have Good Credit

The borrower must have good credit to get their mortgage refinanced. Most consumers refinance as a way to get a better mortgage. Increasing their credit scores helps them borrower qualify for more loans. Minimum requirements for refinancing is around 640, but refinancing with a lower credit score doesn’t give the borrower the benefits they want. If the borrower cannot get the benefits they need, it isn’t the right time to refinance the mortgage. 

They Cannot Have Late Payments

The borrower cannot have any late payments. Lenders review the existing mortgage on the borrower’s credit history. If the borrower has any late payments or late charges, they won’t get approved for a new mortgage. The borrower must maintain a steady history of on-time payments even if they refinance through another lender. 

How Much Equity is required?

The homeowner must have at least 20% equity built up in their existing mortgage to qualify for refinancing. Some borrowers choose to use a cash-out refinance to get more money for a variety of reasons. If they want to cash out their equity, the borrower must have at least 80% equity when they apply for refinancing. 

What are the Most Common Reasons for Refinancing?

The most common reasons for refinancing are to get a different mortgage and to lower the interest rate. Borrowers refinance to get a fixed-rate mortgage if they don’t want their payments to increase over time. If they have a fixed-rate mortgage, the homeowner might want to get an adjustable-rate to lower their interest rate. Refinancing can also give the borrower a chance to get extra money for a renovation project or to update certain features inside their home. Borrowers can get more information about refinancing by contacting Dustin Dimisa now. 

Are There Restrictions on How They Use the Money?

No, the lender won’t question the borrower about any additional funds they get when refinancing. There aren’t restrictions for how the borrower uses any equity they acquire when refinancing. Typically, the loan application asks for a reason, but the borrower isn’t required to go into great detail. 

An Alternative Measure

If the borrower needs to refinance and don’t qualify themselves, they could get someone they trust to co-sign with them. A co-signer must qualify with the minimum eligibility requirements. However, their credit scores affect the interest rate and how much the homeowner can borrow. 

Homeowners refinance their mortgage to get a better interest rate and lower their payments. They might tap into their equity and borrow extra money for renovation projects or to pay off some debts. Homeowners can learn more about refinancing by contacting a lender and scheduling an appointment today.