Refinancing is a process that many homeowners use for various reasons. You can refinance for many purposes, but it is vital to know that some factors might affect your ability and terms. Here are several factors that will affect your ability to refinance and the terms you receive from your new loan.
The Appraised Value of the Home
The appraised value of the home will affect the outcome of refinancing. First, it might affect your ability to refinance your loan. Lenders require appraisals before closing on loans, and they require these to find out a home's value. Most mortgage lenders will only issue loans for a specific percentage of the value. The percentage might be 80%, but it could also be higher. Therefore, you will need to get an appraisal completed before determining if the lender will approve your refinance. An appraisal is especially important if you want to get cash out of the new loan.
The Balance You Owe on the House
The second thing that matters to the lender is the balance you owe on the home. If you owe more than the house is worth, they will probably deny giving you a loan. Again, they will only loan a specific percentage of the home's value, so they will review your balance before approving your loan.
Your Credit Score and Financial Situation
Lenders also care about a person's finances and credit. If you have poor credit, you might face challenges finding a lender that will offer you a refinancing loan. Lenders base their decisions on credit, and they also view a person's financial state. You might get approved for a loan with poor credit, but the interest rate might be higher than you are currently paying. If you have great credit and have your finances in order, you should have no trouble getting approved for a refinance loan.
Consider How Long You Plan on Living There
It is also wise to consider how long you plan on living in the house before refinancing. Refinancing a loan requires paying fees, and paying these fees might not be worthwhile if you plan on selling the house in the next year or two. Therefore, consider this before you decide if you want to refinance. If you want to go through with it, contact a lender to learn more about the process. A lender can assist you with the application process and answer all your questions.Share