Current mortgage rates are attractive for homeowners who want to refinance. But what if you are self-employed and don't have a regular income? Self-employed folks often do have a tougher time qualifying for a home refinance, but getting a loan isn't impossible.
Credit scores always matter
Whether you work for a large company or run your own business, having a good credit score is important when refinancing. Mortgage lenders are scrutinizing mortgage loan applications to avoid borrowers who appear high-risk; in many cases they are reluctant to approve refinancing for people with scores below 680. Your credit score is based on a variety of factors, including your history of making payments on time and number of open credit lines. Take time to repair your credit and boost your score before applying for refinancing.
Be ready to document everything
Mortgage lenders want borrowers to document their income when applying for a mortgage. You'll need to have financial statements for your business and personal and business tax returns to verify income. Other documentation you may have to provide includes statements from bank accounts and investment accounts. Mortgage lenders want to know that you have a viable business and are likely to continue earning enough income to make mortgage payments.
How much home equity do you have?
Millions of homeowners are underwater on mortgages, owing more that their homes are worth. Even if you aren't underwater, you may have lost some equity in your home as the housing market has struggled. Depending upon your situation, you might need to bring cash to closing to get approved for a refinance. A cash-in refinance allows you to increase your home equity, which may be viewed more favorably by mortgage lenders.
You might be denied refinancing
Even if you do everything asked and provide all the documentation requested, you might be turned down for a home refinance. Mortgage lenders are still reluctant to approve mortgages for borrowers they perceive as risky. If you are denied refinancing but can't afford to continue making mortgage payments, you may need to consider some alternatives.
Among the things to consider are getting your mortgage lender to agree to a short sale. In a short sale the mortgage lender agrees to allow you to sell your home for less than what you owe on your current mortgage. Having a buyer lined up first can improve the chance of getting the OK for a short sale. Another option is to ask your mortgage lender to modify your loan. Getting a mortgage loan modification requires persistence. It may take several attempts to reachy your mortgage lender before getting the results you want.
Current mortgage rates are historically low. If you believe that doing a home refinance can help improve your financial situation, do whatever you can to provide all the information needed to make the application process as smooth as possible.