Homeowners who meet certain criteria may be eligible to refinance their home loan. The specific eligibility requirements can vary depending on the type of refinance and the lender’s guidelines, but some common eligibility factors include:
- Sufficient equity: To qualify for a cash-out refinance or a cash-in refinance, you generally need to have at least 20% equity in your home. For a rate-and-term refinance, you may be able to qualify with less equity.
- Good credit: Most lenders require a credit score of at least 620 to qualify for a refinance, although some may have higher or lower requirements. A higher credit score can help you qualify for a lower interest rate and better terms.
- Stable income: Lenders typically prefer borrowers who have a stable source of income and a low debt-to-income ratio. This can help you qualify for a lower interest rate and higher loan amount.
- Property value: Lenders will usually require an appraisal to determine the value of your property and ensure that it meets their lending guidelines.
- Loan-to-value ratio: This is the ratio of your loan amount to the value of your home. Lenders typically prefer a loan-to-value ratio of 80% or less, although some may allow higher ratios.
- Other factors: Lenders may also consider other factors such as your employment history, savings, and debt-to-income ratio when evaluating your application.
It’s important to talk to a mortgage professional or financial advisor to determine whether you are eligible to refinance and whether it makes sense for your financial goals and circumstances.