With interest rates lower than they have been in many years, many homeowners are asking themselves Should I refinance my mortgage? It is tempting to think that you can just go down to your local bank or make a few phone calls and presto, you will have saved a lot of money, but the cold reality is different. Because of the number of homeowners that are defaulting on bad loans and the proliferation of bad loans that were written in the past five years, banks and lending institutions have tightened credit. What this means to the general public is that lending requirements are much more stringent now than at any other time in history.
So the answer to the question Should I refinance my mortgage? may be yes, if you are actually qualified. To be certain that you are qualified you need to make certain of a few things first. Your FICO (Fair Isaac Company) credit score needs to be above 700 and preferably above 720 with no late payments on any debt within the last twelve months and no bankruptcies, foreclosures, or judgments on your credit history. Your employment needs to be steady and the longer the better. If you just started your job a few months ago, that can be alright as long as you have been employed in the same general field for a number of years.
If you are self-employed and are asking yourself should I refinance my mortgage, then you need to be prepared to show good earnings through the past two years of tax returns with all schedules attached, plus a current profit and loss statement prepared by a CPA.
The most important factor to consider when asking yourself should I refinance my mortgage is whether or not you have equity. Many homeowners these days find that they are upside-down on their mortgage loan and actually owe more than the property value will be appraised at. Banks will not want to loan on any property with an LTV (loan to value) ratio of more than 80% generally. With property values still declining around the country, banks will generally want to see a much lower LTV before they take the risk of refinancing your mortgage.
So if you are still asking yourself should I refinance my mortgage, you may want to consider the alternative of Loan Modification. Experts recommend that you find a reputable, professional company that specializes in Loan Modifications in order to get a lower interest rate that you can afford.