Before you can refinance your home mortgage, you need to apply. At this point, you should have already identified the right type of mortgage for your needs, and you should just need to do the paperwork. Here’s an overview of the process so you know what to expect and what the lender takes into account when reviewing your application.
The Application
Most lenders have a basic application which may be a paper or an online form. Typically, the information is fairly straightforward, but if you have any questions, you should reach out to your lender directly. Never hesitate to ask questions. Remember, these professionals are working to help you.
They can also let you know why you need to include certain information. For instance, you usually have to include a copy of your social security number. That allows the lender to check your credit score.
Credit History
Although you own a home, you usually still have to prove that you have strong credit history if you want to refinance a home mortgage. If you’re worried about your credit, you may want to try to clean it up a bit before applying. You can get a free credit report online or you can call one of the three credit reporting bureaus (Experian, TransUnion, or Equifax) and ask them to mail you one. Alternatively, you can start the application process and ask the lending agent if they see any issues with your credit report.
The top of your credit report contains judgments against you and bills in collections. Try to take care of those bills to boost your score. If you have a lot of credit card debt, you may want to pay that down as well. Keep in mind that some mortgages such as FHA mortgages tend to have looser credit requirements than other types of mortgages such as non-conforming loans.
Income
Your lender also wants to ensure that you can afford to make your payment when you refinance your home mortgage. To ensure that’s likely to happen, your lender will typically ask to see proof of your income. If you have an employer, you can provide your paycheck stubs. If you are self employed, you usually need to provide a few years worth of business income statements or profit-and-loss reports. In both situations, the lender may ask to see copies of your tax returns.
Bank Account Statements
Sometimes, when you refinance home mortgage, the lender asks to see your bank account statements. As a general rule of thumb, you usually need to show the last two or three months of statements. This information gives the lender an idea of how you handle your money. If you have lots of bounced checks or overdraft charges, that does not reflect positively on your application. Luckily, you can easily straighten up your records before you apply. Just make sure that you are very responsible about how you use your checking account in the months before you apply.
Once you complete the application to refinance your home mortgage, you need to get the appraisal. If everything goes well, you are well on your way to getting approved and enjoying a new mortgage. To learn more or to start the application process, contact us at BrightPath today.