Low-income home buyers with subpar credit may not believe refinancing their home mortgage is an option. There are other qualifications assessed when applying for a mortgage refinance, however.
As a result, the first step for anyone with a low income who is interested in refinancing their mortgage is to consult with a trusted lending company to find out what they need to qualify.
What exactly is a mortgage refinance?
The dictionary definition of refinancing is “to renew or reorganize the financing of something” or “to provide for (an outstanding indebtedness) by making or obtaining another loan or a larger loan on fresh terms.” Refinancing a mortgage means obtaining a new loan to help pay off a person’s current one, typically, to utilize better rates.
As discussed in one of our previous posts about mortgage refinancing, this course of action doesn’t eliminate your debt—instead, it eliminates that particular debt, but you’ll still need to pay back the refinance loan. As aforementioned, however, refinancing is beneficial when you’re able to take advantage of lower interest rates, which in turn, equate into smaller monthly payments.
According to a recent CNBC article, current interest rates are low, which means many homeowners may want to consider refinancing.
“There are now about 5.9 million borrowers who could see their rates drop by at least 75 basis points by refinancing their mortgages," it reads. "That is an increase of 2 million in just the past month, according to Black Knight, a mortgage software and analytics company.”
“That is the largest population of eligible candidates in nearly three years and represents an aggregate of $1.6 billion in potential monthly savings," continues the article. "Per borrower, the savings is about $271 per month.”
If you’re interested in refinancing your mortgage, but worried your income is going to hold you back, consider contacting a mortgage lending company.
A knowledgeable lender will break down exactly what you’ll need to provide when applying for a refinance. Such information typically includes, but is not limited to:
- Debt-to-Income Ratio
- Tax Returns & W2s
- Bank Statements
- Employment History
- Investment Information
- Credit Report
- Financial Obligations (i.e. child support)
Remember: A lender is looking to see if your financial history indicates you’ll be able to pay back the loan. As a result, your income is a factor, but not the only one.
There are refinancing programs lower-income home buyers should consider.
For example, anyone who obtained an FHA loan may want to look into an FHA Streamline Refinance.
The Federal Housing Administration (FHA), which is a part of the U.S. Department of Housing and Urban Development (HUD), insures FHA loans to approved mortgage lenders to help applicants who wouldn’t necessarily qualify for a conventional loan become homeowners.
HUD’s official website details what an FHA Streamline Refinance is, stating:
“Streamline refinance refers to the refinance of an existing FHA-insured mortgage requiring limited borrower credit documentation and underwriting. Streamline refinances are available under credit qualifying and non-credit qualifying options.”
To learn more, contact an FHA-approved lender.
Contour Mortgage has worked with numerous homeowners to refinance their mortgages. Contact us today to find out about how we can help you.