Income Requirements When Refinancing a Mortgage

Posted by  on Feb 05, 2010

Doing a home refinance has gotten much more complicated than just a few years ago when the economy was booming. Many mortgage lenders are unwilling to approve a refinance if you don't have a stable income history. Here are a few factors that can affect how mortgage lenders view your income.

Changing Jobs Before Refinancing

Mortgage lenders look at how much you can document that you earn and whether you are expected to continue earning it. So the timing is key if you plan to change jobs and want to do a mortgage refinance.

Mortgage underwriters generally want to see a stable income history going back at least two years. The longer the better. Changing jobs to increase your income can work in your favor if there isn't a gap in your employment history. It also helps if you are still employed in the same field instead of switching to a different career. Changing jobs probably won't make much difference if you boost your income, but taking a pay cut is likely to hurt your plans to refinance.

Being out of the work force even for just a few months can negatively impact the ability to get approved for a mortgage. Your income history would show a gap in employment. Depending upon the situation, you may or may not get approved for a mortgage refinance. Mortgage brokers may scrutinize your credit score and down payment more closely. The amount of equity you currently have in your home also is important. If possible, refinance a mortgage before switching jobs.

Self-Employment and Refinancing

Many Americans dream of entrepreneurship. In today's economy, however, being self-employed may not work in your favor when trying to refinance.

Despite today's mortgage rates being so low, the self-employed may have a tough time refinancing if they can't document income. Stated-income mortgage loans are a thing of the past, so you need to be able to show tax returns for at least two years.

Even if you have tax returns you still may be considered too risky for a mortgage refinance. Mortgage lenders may deny refinancing to self-employed folks if they think there is a chance the income stream may dry up. In some cases having excellent credit and a low level of debt may help. Obviously it makes more sense to refinance your home before starting a business if possible.

Use a Mortgage Calculator

To determine how much income you need to qualify for refinancing, use a mortgage calculator. You can input your income, mortgage amount, interest rate, down payment, monthly housing expenses, and other debt to calculate how large of a mortgage loan you can afford. Having this information can help you shop for the best mortgage deal and not waste time being turned down for loans you can't afford.

Home Refinance Scams

You've probably seen advertisements claiming you can refinance a mortgage loan even if you have bad credit or can't document your income. Avoid companies making such claims because most mortgage lenders are no longer willing to lend money to high-risk borrowers. Always be skeptical of outrageous claims and look for mortgage quotes from reputable mortgage brokers who have handled loans in your community.


  • Mortgage lenders are reluctant to approve refinancing to people who lack a stable income.
  • If you change jobs in the same field and earn more money you may get the OK for a home loan refinance.
  • If you don't have a stable employment history of at least two years, it may be tough to get approved for a mortgage refinance.
  • You need tax returns for at least two years to qualify for refinancing if you are self-employed.
  • Some self-employed individuals are being denied refinancing even with a healthy income and good credit.
  • A mortgage calculator can help determine how much income you need to qualify for refinancing a mortgage loan.
  • Watch out for home refinance scams that claim you don't need to document your income.


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