Are You Ready to Refinance?

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  • Your home equity, unpaid debt, and cash reserves are all key to getting a refinance.
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3 Things That Can Make It Hard to Refinance Today

There are “do’s” and “don’ts” to every part of life and that includes home mortgages. The staff at Bills.com gets asked all the time about what to do because very few consumers raise questions about what mistakes to avoid. A frequent question we hear is, “What can I do to make sure I am able to refinance when I am ready?”

There are three things that can really make it hard to refinance today:

  1. No Equity in Home
    If you have little equity built up in your home, refinancing is going to get tougher. Another term for this is the loan-to-value (LTV) ratio of your home. It is usually described as a percentage of the overall loan amount compared to the appraised value of your home. If you have less than 10% equity or an LTV ratio of 90% or more, it isn’t going to be easy to refinance your mortgage.
  2. Other Unpaid Debt
    If you have other debts on top of your mortgage, they can impact your ability to refinance. Lenders today need to see that you are paying less than 38% of your income to your debts. If you are paying more of your earnings towards your debt, you will not be able to get the best rates and may not even be able to refinance at all.
  3. No Cash
    The last stopper on your refinance could be a lack of cash on hand. Having cash set aside for emergencies as well as to cover closing costs is an important part of refinancing. Cash may also be used to get a better interest rate or lower the overall loan balance. Having some cash on hand is important if you want to refinance successfully. Fannie Mae guidelines require three months cash reserves of principal, interest, tax, and insurance payments, also known as PITI. These funds need to be seasoned for two months, which means that you need to show the funds sitting in your account for one entire bank statement monthly period (not deposited). Other forms of liquid reserves include a percentage of your retirement funds, IRAs, stocks and bonds, life insurance face values, and other investments which may be considered liquid or partially liquid by the lender according to Fannie Mae guidelines.

The Bills.com Refinance Calculator helps you to decide quickly whether a refinance makes sense for your specific situation. The Home-Account Service allows you to see the very best rates that have already been qualified for based on your income, home value, and credit — and request that specific loan from the lenders shown. Or if you prefer to talk to a some lenders and negotiate the best terms with a few, get a Bills.com Quick Quote and get matched with some of the best lenders in the country based on your unique situation and needs.

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