When you apply for a mortgage, the lender does a background check on you. This check is to determine your creditworthiness and access the level of risk lending you money would pose. This is known as the underwriting process. During this process, the underwriter attempts to verify the information you have provided. This is done by checking in with your employers, your bank statement for the previous 3-6 months, and things alike.
For mortgage lenders, the ability to pay back what you owe at the agreed time is an important consideration. Anything that could affect your capacity to make the payments on time is a source of concern.
Before you decide to do a home refinance, evaluate the benefits vs. the closing costs to make sure you understand the entire picture and if it is smart to move ahead. Starting by consulting with a Financial Advisor or a CPA is a good idea. They often are the ones who recommend refinancing to their clients when they can see that the benefits outweigh the costs.
Most couples apply for mortgage loans jointly. But what happens when one of them has bad credit?
A cash-out refinance is a way to both refinance your mortgage and borrow money at the same time. You refinance your mortgage and receive a check at closing. The balance owed on your new mortgage will be higher than your old one by the amount of that check, plus any closing costs rolled into the loan.
Private mortgage insurance might be one of the costs that you most hate to pay when you send in your mortgage payment each month. It's not necessarily because of the expense. It's because this insurance doesn't cover you. Instead, it protects your lender in case you default on your loan.
Reasons Not to Refinance Your Home
Refinancing your home is not always the best option. Your personal situation should be the biggest factor to consider. Some reasons not to refinance your home are:
Income verification is a basic part of applying for a home loan. But there's more to providing proof of income than just handing over a couple of paystubs. You need to be able to show your earnings are stable. When making a down payment, you may have to be able to show the source of that money as well.
It's not uncommon for home buyers to get cold feet when it's time to sign the papers that make their mortgage loan official. Taking on a monthly mortgage payment is a serious financial responsibility. Seeing all that new debt on paper can make even the calmest home buyer sweat a bit.