Qualifying For A Refinance

Will you qualify? That's the first thing you should think about before going through the enormous paperwork necessary to get a refinance these days.

To get a refinance now you need sterling credit scores and abundant equity in your home. And even then a refinance is not assured.

The Washington Post reports:

– How much equity do you have? If you have at least 20 percent equity based on the current market value, then you should be able to do a conventional refinance. Today, conventional lenders won't do a refinance unless you have at least 20 percent equity in your property and have verifiable income. Federal Housing Administration backing is available for loans with less than a 20 percent down payment, and their guidelines differ somewhat from most Fannie Mae and Freddie Mac lenders, but these FHA loans are generally available for new purchases of homes and not for homeowners who want to refinance.

– Can you qualify for "underwater" mortgage programs? If the value of your house is less than what you owe on the mortgage, then you are considered to be under water. If your loan is owned or securitized by Fannie Mae or Freddie Mac, you might be able to refinance even if you are under water. In some federal programs, you may be able to refinance even if the loan balance is 125 percent of what the house is worth.