Friday, April 10, 2015

Qualifying for a Refinance

People choose to refinance their home for many different reasons, each with their own benefits. For some of the most common reasons, check out our blog titled, "6 Reasons You May Want to Refinance." Refinancing is not an automatic thing though; it takes some time and preparation just like applying for a new home loan. Homeowners who want to refinance their homes must meet some requirements first. Here are are some general qualifications from you will need to meet in order to refinance your home at the Lake of the Ozarks:

1. Financial Requirements

While there are some exceptions, most mortgage companies do not offer refinancing to those homeowners who are in default on their loan. After all, who would want to lend money to someone who isn't able to make their payments? By refinancing a loan in default, the financial institution is running the risk of having to foreclose on the property in the future. Lenders also require homeowners to meet other financial criteria, depending on the type of loan. For example, an FHA loan requires borrowers to meet income standards and also considers monthly expenses to help the lender determine the homeowner's debt-to-income ratio. FHA loans require housing costs to be no more than 31% of a borrower's total monthly income.

2. Closing Cost Requirements

Just like with a new home loan at the Lake of the Ozarks, a refinanced loan require the borrower to pay closing costs. These costs include:
  • appraisal fees
  • prepaid interest or points
  • title search fees
  • title insurance
  • and loan application fees.
In order to refinance, borrowers must pay all these fees at the time of refinance. Typically, the closing costs cannot be rolled into the mortgage loan principal. 

3. Equity Requirements

Often times, mortgage lenders require homeowners to have some equity in their home. This means the value of the home must be higher than the amount the homeowner wishes to borrow. Most mortgage lenders require 5% equity. This means that the loan cannot exceed 95% of the home's value.

4. Loan Application

When refinancing your home, you still need to submit a formal loan application. While a lender might discuss potential interest rates and various closing costs, the lender cannot determine whether an individual qualifies for a refinance loan until the application is completed. You will need to include the following with your application:
  • credit history information
  • income information
  • employment history
  • the property value of the home and land
  • and the amount of equity the homeowner has. 
The lender then uses all this information to process the loan aplication. the process includes verification of employment, an appraisal of the property and a credit check. 

Each situation is different and it is important to talk to your Lake of the Ozarks mortgage lender to see what specific requirements you must meet in order to refinance your home. When it comes to your financing needs, I'm committed to working with you every step of the way. I'll discuss financing options, offer competitive interest rates and back it up with the FIRST Class Service you deserve and I guarantee.

For Lake area news, resources and tips on financial services, please 

Michael Lasson
Sr. Residential Mortgage Lender
NMLS #: 493712

2265 Bagnell Dam Blvd, Suite B
PO Box 1449
Lake Ozark, MO 65049

Direct:  (573) 746-7211


**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

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