During stressed economic times Americans look for ways to stay afloat by using money management skills. Many of these Americans may be looking to refinance their mortgages. Home sales are currently plummeting and money is tight all around which makes it difficult for the average person to refinance their home. The credit crunch has tightened options but there still are refinancing programs available. Individuals in good credit standing can still qualify for loans if they meet certain other criteria. Individuals in poor credit standing even have options in the form of government assistance.
If you are one of the lucky ones with a good credit score, you do have options to refinance your mortgage during these tough economic times. However, those options have been limited. In the past, a high credit score and equity in your home would have been enough to qualify for refinancing. These loans didn't require verification of employment or assets such as bank accounts and investment portfolios. In the credit crunch you may have to jump through more hoops to reach your goals. Banks and lending institutions are keeping a close eye on your debt to income ratio.
When banks look at your overall credit they will calculate how much credit you have in relation to your total credit limit. When they look at your debt to income ratio they will be calculating the percentage of debt in relation to your total monthly income. Basically speaking, if you carry a large amount of debt the banks will be more wary about giving you a loan. They do not want to see that your monthly mortgage and credit debt exceed 36-38% of your total income. If it does you may not be able to acquire a loan.
Income and assets will have to be verified. If you're self employed be prepared to show copies of tax statements for the last several years.
For those individuals with poor credit, hope should not be lost altogether. It will help you to stay informed of current events in the field of credit lending because of the unstable current market. In addition, you may qualify for a government assistance loan.
Based on bills passed by Congress in 2008 and 2009, people can now refinance their mortgages even if they have little equity in their homes or credit scores below 700. This will especially help those that have found that the amount of debt left of their home actually exceeds the current value of their home. Whereas you could not in the past, government loans will allow refinancing up to 105% of your home's appraisal. If you think you may be a candidate for a government backed loan it would be a good idea to get in touch with a mortgage relief specialist.
There is no doubt that the credit crunch has been tough on everyone from the average consumer up to large corporations. However, it does not mean that you don't have options when it comes to refinancing your mortgage. It may also help to keep in mind that if you are turned down by one bank for refinancing that you should not give up your search. Visit other banks and credit unions to explain your unique situation to a loan officer. Keep looking for a loan you can qualify for, especially if you are in good credit standing and have assets that can be used as collateral.
by Dee Power
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