Refinancing Your Home

Mortgage rates today are at a 60-year low, giving many Americans the ability to refinance their mortgage. Home mortgage or home loan refinancing is basically taking out a new mortgage to pay off the existing one.

Refinancing can be a good idea if you can get a lower mortgage rate to save on costs, lower your monthly mortgage payment, raise cash or other things that may help you reach your financial goals.

But here are some common reasons you may not be able to qualify for a refinance and some tips to help overcome them.

* Low Credit Score.

To get the best mortgage rates, the bank looks for credit FICO scores higher than 740, with 620 considered the minimum to get a refinancing loan. However, if your score doesn’t allow you to get one, you can contact the Federal Housing Administration, which currently has a minimum score of 580. You will want to move quickly if looking at FHA loans, as changes are expected this year, making them more expensive and harder to get.

You can visit to see tips on how to raise your credit score and get the best rates.

* Little To No Equity.

The values for many homes have not recovered from the recent housing crisis, leaving some homeowners with little room to refinance. The government has set up the Home Affordable Refinance Program (HARP) to specifically help underwater homeowners refinance their mortgages. HARP has expanded to where there are no underwater restrictions to get one, such as primary mortgage insurance, but different lenders have different standards, so shop around to get the best rates.

* Lower Income.

Times have been tough the past few years for some people. If you had to take a lower-paying job, as long as you’re current on your loan, you can still refinance your mortgage with HARP. The expanded program no longer requires proof of income, but as long as you are employed and have been making payments on time, you may be able to refinance your house. If you are considered self-employed (business owners, people who own more than 25 percent in an entity, W2 employees whose salary is more than 25 percent bonus or commission), you will need to show at least two years’ worth of history in order to use your income for mortgage qualification purposes.

* Refinance Costs Are Too High. Refinance fees are typically 2 percent of the loan amount. If you are unable to afford these costs (closing, appraisal, credit checks, etc.), you may be able to roll up the closing costs into the loan or, in exchange for lower or no closing costs, the lender may refinance the loan to a higher interest rate. Don’t be afraid to shop around and negotiate with lenders. It is important to get the best deal possible.

Rates have fallen steadily for so long that many homeowners have refinanced multiple times!

Low mortgage rates make refinancing very appealing, but make sure it makes sense and meets your personal financial goals.