What to Do When Your Request to Refinance Your Home Is Denied
It can be disappointing when you try to refinance your mortgage and you get turned down. Here are some of the possibilities that a homeowner could be deemed unqualified for a home loan refinance.
One reason is a poor credit history. Lenders are inclined to turn down a refinance if the homeowner’s credit score or credit history is deemed unsatisfactory. It’s good to keep in mind that credit score standards have changed. If you were able to get financed with lower than a 620 score four years ago, getting refinanced with the same score now could be difficult.
A low appraisal, meaning that a home is worth less than the amount owed on the mortgage (negative equity), could result in a homeowner being turned down for a refinance.This is actually one of the more common reasons.
If a homeowner does not have paycheck stubs to prove that he earns a steady income, often due to self-employment or operating a small business, he may not get refinanced. Other homeowners find their income is considered unacceptable because it comes from a severance package or another resource that is expected to end.
A real estate investor could also have problems refinancing a home if a lender discovers that he owns more than four properties. This is because lenders are leery of an owner’s ability to repay the new mortgage with too many properties also awaiting repayment.
What to Do If Your Mortgage Refinance Is Denied
Look for another lender. It’s recommended if you are turned down to keep looking for a lender to work with. If you have already lost money in the process, however, it’s a good idea to proceed with caution as you approach new lenders.
You could consider government programs. Many homeowners strapped with underwater mortgages have looked for ways to modify, or in many cases, refinance their mortgages.
Another option is to look for a lender that doesn’t require an appraisal or high credit score. Many find that a FHA mortgage refinance works well in accomplishing both goals. Because an FHA requires a lower credit score, it’s easier to qualify. And as part of the “streamline refinance” option, no appraisal is required.
Unfortunately, those who work as real estate investors might have a more difficult time working around a declined refinance because lenders simply don’t like the idea of refinancing when multiple properties exist. This doesn’t mean refinancing is impossible, it just means that you will want to follow the above mortgage refinance advice and continue pushing in hopes of convincing a lender to work with you.