There are several things you will need to consider before you get yourself involved in home refinancing. To help fill the gap, here are the most important details you should never miss about this particular transaction:
Your Home Equity
According to Wasatchpeaks.com, qualifying for a home refinance in Ogden needs you to improve your home equity. This is necessary, since most of the home values across the country are drastically dropping. This could mean that the down payment you’ve given years ago just evaporated. To find out whether you can qualify for a new loan or refinancing, it is always good to check now and then where your home’s equity stands.
Your Credit Score
Nowadays, most lenders have strict standards when it comes to loan approval. That means you will need a good credit score to be able to qualify for a new loan. However, it doesn’t always follow that debtors with good credit will automatically receive approval on their application. Why? Because lenders usually require their borrowers to have at least a 720 credit score and above just to qualify for a new one.
Your Debt-to-Income Ratio
Having a high income doesn’t necessarily secure you to qualify for a home refinance in Ogden. It is because the majority of lenders require a monthly household expense, such as your taxes and insurance, to be no more than 28% of your gross income. Therefore, you will need to have a 36% or less debt-to-income ratio. A good solution for this one is to pay off some of your debts.
Your Break-even Point
Another important thing you should look at whenever you want to refinance your mortgage is the break-even point — the cost of refinancing your savings will have to cover. Say for example, when your refinance cost of $2,000 can save you $100 per month over your previous loan, it’ll only take you 20 months to get back your total expenses.
Just like any financial transaction, mortgage refinancing is an extremely complex deal. It requires tedious consideration and evaluation on the part of borrowers. So, if ever you don’t clearly understand something, it is best that you communicate with an expert before you involve yourself in any transaction.