Los Angeles Mortgage Broker Shares About Refinancing a Mortgage Loan
Refinancing is the replacement of an existing loan with another loan to pay off the former. This process allows a person with an existing loan balance to save money on interest, to lower their monthly loan’s premium, or to switch from a variable interest rate to a fixed one.
Refinancing is a helpful option for people looking to replace a home loan, auto loan, or student loan. If you’re planning to refinance, you’re essentially applying for a brand-new loan, which means that you’ll have to go through the whole process again, starting from the approval.
In that case, you’ll need to understand what the specific qualifications are when you are applying for a new loan. By doing so, you’ll identify the potential gaps in the process of refinancing, especially the requirements. This will allow you to improve the odds of your approval.
Refinancing qualifications
Know that the needed requirements will vary depending on the lender and the loan type. However, you must secure:
- A decent credit
- An income sufficiency
- An equity sufficiency
While credit is important, a perfect credit with a notwithstanding balance is not always required. However, your credit must still be deemed decent and workable by the lender before you can get approved.
In some government programs, a credit score of only 580 is required, while some don’t even impose any minimum credit. In qualifying for a standard mortgage refinancing, however, you will need to have a credit score of 620 at the very least.
By having a good credit history, your chances of getting approved for your loan at lower interest rates become higher, so always remember to make your credit realistic.
Fix Inaccurate Details
As much as your lender needs an accurate credit report, you will also need the same as this is what most loan lenders will look at first.
Specifically, check for negative items, such as late payments and collections. If these are not accurate, contact the respective credit bureau and have them remove it. If it is, you can still try, although it’s likely that they won’t do that.
Pay Down Balances
Regarding credit, you don’t want to be constantly maxing out your credit cards because it will increase your credit utilization ratio to 100 percent. This ratio is the percentage of total available credit that’s currently in use. A 100 percent ratio is three times the recommended ratio, which should be just under 30 percent.
The best way to address a credit issue is to always spend any free cash that’s available to pay your loan balances on time. To reiterate, having a good credit score enables you to have a smoother process when you apply for refinancing.
You can also control your expenses by requesting a credit limit increase, which will make your balance significantly lower in contrast to your total available credit. Keep in mind, however, that you can temporarily decrease your credit card when you do this, which has a negative impact on the interest rate of your new loan.
Mortgage Refinancing Conclusion
Refinancing a mortgage allows you to sort out and manage your expenses without accumulating a large amount of money in just a short time, especially if your premiums are already due. When looking into applying for a loan refinancing, always remember the needed requirements and qualifications. The most important factor to remember is your credit, so be careful not to exceed your debts or max out your credit card to ensure that most lenders will approve your application.
If you’re planning to refinance to pay off your mortgage in Los Angeles, give Shannon Christenot a call at (818) 601-2231 today.
