How to determine if you qualify for refinancing your home

Since interest rates are currently low, you might be considering refinancing your home. If you currently have an adjustable rate mortgage, you might be considering refinancing your home to a fixed rate mortgage before your adjustable rate goes up again. Before you go to the bank to apply for refinancing, you should first answer some simple questions that will help determine if you quality for refinancing your home.

• Payment History - The first question you need to ask yourself is if your mortgage payments have been current.  Most lenders will not consider refinancing your home if you have been more than thirty days late in the last twelve months.  This means that all twelve of your last payments have been received by your lender 30 days or less after the payment date.

• Home Value - The current value of your property is a crucial point in determining if you qualify for refinancing your home.  If you have a FNMA (Fannie Mae) or FMAC (Freddie Mac) guaranteed loan you may be eligible for refinancing under special programs.

• Monthly Income - You must be able to prove a steady source of income. Many lenders will require that you have been on your job for a period of twelve to twenty-four months. This may be waived if you were laid off and later re-employed in the same field.  Most lenders will require that you provide them with your last four pay stubs (some will require only two while others may require more).

• Monthly Expenses - Numerous expenses will play a role in your ability to qualify to refinance your home.  You will need to list car payments, insurance payments (home, auto, life and medical).  In addition, credit card payments, and any other revolving credit lines will impact your ability to qualify for refinancing your home.

• Credit - Outside of your mortgage payment you should verify all other credit obligations.  Although lenders are primarily interested in your mortgage payment history, other payment history is certainly a consideration when you are trying to determine if you qualify for refinancing your home.  If you have had payments that were overdue by more than 30 days, be prepared to offer a full, written explanation for the reason.

• Property & Income Taxes - While you might think that your taxes are not important in determining if you qualify to refinance your home, they are in fact very critical.  Your property taxes must be up to date. In addition, you are going to be required to present a minimum of two years of completed federal tax filings (and some lenders will require three while some will require only one).

• 2nd Mortgage or Equity Line - If you currently have a second mortgage or equity line, you may find the combination of that credit plus your current mortgage means that your home value is insufficient to refinance your home.

If you have addressed all of these items, you are now prepared to speak with your bank or your lender and ask how to determine if you qualify for refinancing your home.  There are several very good programs that are available to help homeowners refinance their home and make them more affordable.