If there’s been one good thing that’s come out of the COVID-19 pandemic, it’s low mortgage refinance interest rates. The Motley Fool recently reported that with rates being so competitive, homeowners are flocking to take advantage. If you refinance your mortgage, you can lower your monthly mortgage payment substantially, saving you cash. It is, quite simply, one of the smartest financial decisions you can make. That’s the good news.
Now for the bad news. In light of COVID-19, some lenders have instituted harsher qualifying constraints because of economic disruption and 1930s Depression-era level unemployment. This is making it harder for many people to qualify for a badly needed mortgage refinance loan.
Naturally, if you’ve applied for a loan and been turned down, you’re going to be angry and disappointed. You might even feel a little desperate. But fortunately, there are other options you can pursue that will allow you to secure a more financially beneficial home loan in the near future. Here’s what you have to do.
Find Out Precisely Why You Were Turned Down
According to The Motley Fool, you must determine why you weren’t approved for the mortgage refinance loan since you can’t take the necessary steps to fix the problem unless you know what the problem is. One common example could be that your credit has taken a sudden downturn. Or perhaps your residence didn’t appraise well enough to qualify for a new loan.
Whatever the case, you need to call your mortgage lender and get the specifics behind the refusal. With the Equal Opportunity Credit Act becoming law, your lender must disclose the truth if bad credit is the problem.
The fact of the matter is, most lenders will be willing to disclose the problem or problems, even if it comes down to your having insufficient income at present. After all, even if you are going through a temporary economic hardship but have been known to pay your mortgage on time, religiously, your mortgage lender will do everything in his or her power to see that you remain a client.
Now that you’ve identified the specific problem or problems, you can take the necessary action to correct them. If you’ve been tagged as having bad credit, you should review your report and perhaps identify any errors. You can then request that your creditors remove the bad credit “black marks” from your credit report. If that doesn’t work, you must think in terms of budget and get to work on paying down your credit to improve your overall score.
If the low home appraisal is the problem, you can argue that the appraiser low-balled your property and perhaps seek out a second opinion. If your income isn’t enough, it might be time to grab a side gig like driving for Uber, selling products on Amazon, or even becoming an influencer. There are many ways to fix the problems that keep you from getting a mortgage to refinance a loan. But keep in mind, repairing your standing among the lenders can still take time. So be patient.
Lower the Refinance Loan Cost
If you can’t get a big loan, perhaps you should consider going lower. If you opt for a smaller loan, it can help you with appraisal and low-income problems. Note that lowering your mortgage refinance loan size is not always an option since you need to pay-off the existing mortgage before refinancing.
However, if you are considering a “cash-out refinance,” it’s possible to reduce the amount of cash you’re attempting to borrow with a brand new, low-interest loan. If you happen to have a good amount of cash saved up, you could place a lump sum down on your existing loan to lower the balance of the refinance loan.
Not all mortgage lenders are alike. Some are more expensive than others, and some are more discerning when it comes to their clientele’ financial security in the present and the future. Yet other lenders actually cater to those of you who happen to have bad credit or who need to borrow a large sum of money even when your home isn’t appraised as well as you’d hoped.
If you shop around, even after you’ve been denied by a lender or two, continue to ask for quotes from several more lenders. Your landing a nice low-interest refinance mortgage loan could, in the end, boil down to luck. At the same time, don’t just go with the first lender who approves you. Look at the contract’s fine print and make sure the loan will be affordable and compatible with both your present and future financial situation.