How to Refinance Your Home Mortgage During a Credit Crisis

When times are tough, as they are today, there is usually an influx of homeowners looking to refinance their home loans. Everyone’s financial situation is different, but money is tighter all around and refinancing your home loan, even with the credit crunch that is underway, can be a great way to save hundreds of dollars each month.

This credit crunch has limited refinancing options for many homeowners, but there are still programs available to help a homeowner refinance their loan. There are even government plans available for homeowners with the worst credit. Home sales are plummeting, as are home prices, and banks and mortgage lenders want to work with people to allow them to stay in their homes rather than have them foreclosed.

If you have a good credit score, your home loan refinancing options are about the same as they were before the credit crunch. However, there are now more steps and enhanced checks, leaving only the truly qualified, with equity, good credit, verified income and investments, and other strict checks to try to avoid further financial problems for the homeowner, or the mortgage lender, in the future. Mortgage lenders and banks will be keeping a close eye on all borrowers in these tough economic times, but if you are qualified, you will have no problem, just be prepared to go through other steps for your approval.

When a mortgage lender, broker, or bank looks at your credit score and history, the amount of credit you’ve used versus the amount of credit available, or the debt-to-income ratio, be aware that these factors weigh heavily on your interest rate, terms, and conditions of the refinance agreement. In other words, if you have a high amount of debt, have used up most of your available credit, and have a low income, you may not be able to get the best home loan to refinance the deal. Even more simply, your debts must not exceed 40% of your monthly income, including mortgage payments, to get the best terms.

Homeowners with poor or below-average credit scores should not give up. The instability of the housing and credit markets fluctuates wildly on a daily, sometimes hourly, basis, and this can mean that you have the opportunity to refinance, even with bad credit. There may also be government-backed refinancing plans, thanks to President Obama, that can help you.

Homeowners who need to refinance and want to use government plans can do so even with little or no equity in their homes and with credit scores below 700. This helps millions of homeowners who have seen the value of their property drop dramatically and are left with a mortgage worth more than their home, even though they have been paying for their home for years. Now, a homeowner can refinance up to 105% of the value of their home, which opens the door to many more approvals for refinance applications.

The tough economy has proven to be difficult for everyone, especially homeowners. However, don’t let this make you think that you are helpless and have no options to refinance your mortgage. Remember that there are many lenders and banks that want to work with you, even if you have been rejected by a few, keep trying. Use the Internet to find potential lenders and don’t give up. Explain your situation honestly and be vigilant about finding the right mortgage lender at the right time to refinance your home.