subject: 5 Things That Can Derail Your Refinancing Drive [print this page] Real estate section of the newspapers & magazines, TV commercials and radio slots are now replete with refinancing ads. And why not? The rate of interest on mortgage loan has now reached rock bottom and the demand for refinancing loan has skyrocketed. Prospective homeowners are gauging the situation like straight move into the office of a mortgage lender, refinance your mortgage loan with a near to historically low rate and move out of the office with a very low monthly mortgage payment.
Though on paper it seems too easy to refinance in current conditions, in actual practice this may not be a cakewalk. There may be some issues which could derail your refinancing plea. If you are aware of the downsides, then you can at least design a wise course of action. Here are some issues which can derail your refinance mortgage loan drive.
1. Demand for higher credit score
Refinancing is possible only when you have already taken out a mortgage loan. You might have taken out that loan few years back. Now, you want to refinance it at the market conditions have turned favorable for refinancing. But mortgage lenders have also become more vigilant, courtesy the sub-prime mortgage crisis. Lenders are now demanding higher credit score to offer you a mortgage refinancing loan. In the current market conditions, to become eligible for lowest refinance rate, you need to have a credit score of at least 740.
2. Decline in home appraisal value
With decline in the rate of interest, the value of homes has also nosedived. According to a report published by the property analytics firm Fiserv, on an average, home value declined by more than 30% from the beginning of 2007 to the beginning of 2012. Your own calculation on the current value of your home may be an overestimation. It is advised that you should take the help of an expert to estimate the correct market value of your home, before plunging into refinancing.
3. Have already taken a home equity line of credit
You might have already taken out a home equity line of credit (HELOC). The lender who issued the HELOC also has claim on the value of your home. Without the permission of this lender, you will not be able to refinance.
4. Documents not ready and up to date
Another essential thing in refinancing is that you should have all the relevant documents ready with you and those documents should be up to date. If you miss the chance to provide your documents on time you may miss the bus and your next turn may come after a long wait.
5. House specific problems
House specific problems may shatter your refinance dreams. There might be a number of issues related to the building. Some parts of the building may be in foreclosure, insurance may not be paid in full, building association may be under prosecution. All these housing related troubled may come in the way of getting approved for mortgage refinancing.
So before applying for refinancing you need to do a lot of research, should be fully prepared and should fulfill the financial criteria to become eligible for it.
