Top Refinancing Killers: Steps to Avoid Them!

Some great tips to avoid your refinance loan rejection.  Your refinance can be rejected due to anyone of the following reasons. Be cautious by following these great tips.  refinance tips

Credit Report Snafus:

Credit Score is a very important instrument which is analyzed by lenders before lending money to a borrower. So you must be very careful about your credit score and make sure you qualify the prevailing acceptable score.

Steps to follow:

  • Have an eye on your credit score several months before applying for loan.
  • Do not rely on only one credit rating agency; instead get your credit score from two or more agencies, to ensure accurate score.
  • Get the discrepancy resolved by your credit agency, incase you found any.
  • If your credit score is less than 700 points, fix it before applying for a loan.

Too much Debt:

Housing Ratio and the Debt Ratio are the two most important ratios that the lenders look at, before considering your application for loan.

Divide your monthly mortgage costs by monthly income, will give you the housing ratio. Your refinanced housing cost should not be more than 29% of your income, according to the Randy Mitchelson, an Estero, Fla., mortgage broker.

Adding up of all your monthly debt payments, including the mortgage, and divide them by your monthly income, will give you the debt ratio. Usually lenders prefer that no more than 36% of your income should be going towards paying debts.

Steps to Follow:

  • Lower your debt as much as you can.
  • Before applying for refinance, you must be aware of your housing and debt ratio.
  • Try to payoff small loans that you have taken up, and take care of your credit card usage, months before you apply, so that you can put up your credit report to the satisfactory level.

Falling Home Values

There is a chance of your loan rejection incase your house’s current value is less than its purchase price. So be careful to while putting up loan application and wait for the right time to apply.

Steps to follow:

  • Hold your loan application, if the value of your house has been dropped.

Leaving a Job

Lenders are usually reluctant to refinance those who are unemployed, since they have no income surety to repay the loan.

Steps to follow:

  • Refinance now, if you are planning to leave a job.
  • Lenders are more satisfied to refinance those who have at least two consecutive years at one job.
  • Usually those who have their own business are more likely to be rejected, so you have to work well with your application if you are a business person.

Trying to sell first

Newly listed homes are usually difficult to refinance, since rapid sale of the house prevents certain favorable returns from the lenders point of view.

Steps to follow:

  • Keep your home off the market for at least six months before your go for refinance.

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