With the recent credit crunch and tightening guidelines in the mortgage industry, refinancing your home in 2008 and beyond is going to be more difficult than it has in the past. Here are some tips on how to prepare yourself and your credit for the new lending guidelines.
Borrowers with less then perfect credit will also be facing a difficult road when trying to refinance in 2008. With most of the sub prime lenders gone there is a large void left for bad credit borrowers looking to refinance. The good news is that the FHA has stepped in and raised loan amounts to make their programs more available. For an FHA loan you cannot have any mortgage late payments in the last 12 months or you will not qualify.
If you are a borrower that needs special mortgage programs like no doc loans or stated income your options maybe very limited in 2008. Many lenders have all but eliminated many of these reduced documentation loan programs and now favor fully documented loans. Although there are still some reduced documentation mortgage refinance programs available your credit has to be very good to qualify for them and maximum loan amounts for many of them are capped at 80% of your properties appraised value.
The main reason for the cut back in mortgage lending and stricter lending guidelines is the subprime mortgage crisis. During he subprime mortgage boom many borrowers were able to secure home loans without proving there income and were allowed to simply state how much they made. Loans of this type have almost disappeared and lenders now require full documentation of income and assets in almost all situations. With that in mind you should gather the following documents to make your mortgage go smoother and give your loan officer an accurate picture of your finances.
-Most Recent Pay Stub and Work Phone Number
-Last 2 years tax returns
-Current property tax bill
-Any retirement or investment account statements
-Three Most recent Bank Statements
-Name and Phone Number Of home Owners Insurance agent
Although there may be additional document requests the ones listed above are the basic requirements and will give both the lender and mortgage broker the ability to more accurately quote your loan rate and terms
Be prepared for the value of your home to be closely scrutinized: many lenders are requiring review appraisals to ensure the proper value of your home. The huge appreciation of home values in recent years has ended for the time being.