A mortgage lender wants three things from a potential customer: Steady income, a relatively clean recent credit history, and a debt-to-income ratio of 35% or less. Customers who qualify for a mortgage or a mortgage refinance have all three of these qualities, plus a down-payment in the case of a mortgage.
A refinance is almost exactly the same. You need to do some homework to see if you qualify. Start with the Bills.com article How Do I Get a Mortgage Refinance Loan? Next, I recommend you download a Uniform Residential Loan Application (Form 1003), complete it, and start your refinance mortgage loan shopping. Then, go to the Bills.com mortgage refinance saving center for no-cost, pre-screened quotes from mortgage refinance lenders.
Next, go to AnnualCreditReport.com to get a no-cost, no-obligation copy of your credit report from each of the three major consumer credit reporting companies (commonly called "credit bureaus"). Review your report and dispute any inaccurate listings.
To find out more how your credit score is calculated I recommend you read an article I wrote explaining FICO Score Calculation. This should give you a much clearer understanding of how credit scores work.
Finally, lenders calculate and analyze your debt-to-income ratio to determine the size of the mortgage or mortgage refinance you can afford. See DTI: Debt-to-Income Ratio Information to learn how to calculate your debt-to-income ratio.
An appraisal is necessary for a mortgage or a refinance to determine the market value of the property. You indicated you have an appraisal, usually costing $350. Hopefully, it is current and the lender will use it.
This is written in early 2010. The last three years have been brutal for housing values across the US. Some areas have seen market values fall 50%, where other areas have dipped 15%. If the value of the properties in your area have held steady the last 12 months, you may be in a situation where the appraised value on your property may be the same as it was when you purchased it.
You should be able to qualify for a mortgage refinance loan if you have a steady, adequate income, your DTI is 35% or less, and the market values in your neighborhood have held steady the last 12 months. As mentioned, download a Form 1003 and start shopping.
To stabilize the housing market, the Obama administration created the Making Home Affordable (MHA) initiative. One program in MHA to review is Home Affordable Modification Program (HAMP), which helps homeowners in distress to modify their mortgages. Another program to review is the Home Affordable Refinance Program (HARP), which allows homeowners to refinance their existing mortgages to current low interest rates. It is designed for homeowners who are current on their mortgage payments but are unable to refinance to a lower interest rate because their home values have decreased.
Homeowners may be eligible if their first mortgage does not exceed 125% of the current market value of the home. See the HARP Web site for a brief questionnaire to see if you qualify.
Contact your lender and see if the lender is participating in MHA. Review HAMP and HARP and determine your eligibility for each program. If not, the lender may be willing to modify your loan or provide you with refinancing options outside of the HAMP or HARP programs.
I hope this information helps you Find. Learn & Save.