Many Utahns use a mortgage refinance for a variety of reasons. Some want to snag low rates and save thousands over time while others use it to consolidate a mountain of debt.
However, there’s no guarantee you could qualify for a home refinance in Utah. Getting your mortgage application approved in the past doesn’t mean you’d be eligible to get a new home loan. Especially if you’re going to deal with another lender, a refinance is an entirely different mortgage with its own criteria for qualification.
Here are some of the reasons your credentials might not be good enough for a refinance:
No Home Equity
If your LTV is higher than what lenders deem acceptable, then you’d most likely get a no in your application. Little or even negative equity is the most usual reason for denial these days.
While it’s not your fault if the house prices in your market dipped, but you might likewise be to blame if you’re in a deep (or nearly) underwater position. Taking interest-only or negative amortization loans are some of the common reasons you’ve failed to build equity on your property over time.
Low Credit Score
Of course, your creditworthiness at the time of a refinance would matter. Having a crappy credit score, though, wouldn’t automatically eliminate you from getting a fresh mortgage. However, it makes everything a bit more difficult, especially if you’re below 620.
If your debt-to-income ratio is too high, it’s a red flag that you’re less likely to repay your new mortgage. The magic number is a 43%, so if your DTI is higher than this, many lenders would consider you a trouble and deny your refinance application.
Fortunately, many financial products could help you secure a refinance despite having bad credentials. It’s a matter of finding less conservative lenders and making all the effort to prove you wouldn’t default on your new mortgage.