So you’re thinking about refinancing your home mortgage – but before you start the application process ask yourself, are you ready? Lenders evaluate whether or not you’re eligible for a mortgage refinance based on a number of factors including your income, credit history, and current home equity.
Before you apply to refinance your home mortgage, take a moment to determine whether or not you’re in a position to do so with this convenient check list.
- Income – Having a stable income is a strong indicator for lenders when determining if you are a “good risk” who will be able to pay back what you borrow. Take a moment to review your finances and determine if yours is sufficient enough to refinance at this time.
- Credit History – Before applying for a refinance, evaluating where your credit history stands is a crucial step in getting approved for a new loan — and having a favorable credit score can work to your advantage to earn a good loan rate. If your credit isn’t in good standing at this juncture, strive to improve your score before considering a refinance.
- Home Equity – Home equity is the difference between the value of your home and your outstanding balance with your lender. The higher your home equity, the higher the loan amount you will be eligible for as you enter a refinance. If you still have a sizable balance with your lender on your first loan, consider paying down your mortgage before applying for a second one on your home.
If after determining you have your income, credit history, and home equity in check, consider yourself a “good risk” in the world of home mortgage refinancing and seek out a reputable mortgage lender to get the application process started.