Refinancing a mortgage loan or simply figuring out how to refinance can be a total nightmare, especially if you work for yourself and you don’t have the most stable of incomes on paper. Refinancing is, among other things, very complicated, expensive and time-consuming but it can be done: even for the freelancer. Find out how to refinance a mortgage loan with some very helpful tips below!
There are many different aspects of the refinancing process that will be of dire importance:
- Your credit score: Your credit score is going to have to be most high if you want to have a better chance at refinancing. If you’re self-employed, your work history is probably going to seem questionable to your lender. When your lender checks out your credit score, you want them to get the sense that they’re dealing with a responsible person that knows how to take care of their bills and debts. Having a pristine credit score will get you started on the right track with the lender you’re working with.
- Your home’s value: You want to present a loan-to-value ratio of less than 50%. This means that your home should be worth much more than your loan amount. The higher value your home holds in comparison to the loan you’ve taken out to finance it, the better.
The Income Issue
Lenders aren’t so much concerned with the amount you make, but they more or less want to see a W-2 form that states that you’re a full-time employee that receives income in a very steady stream. Anything other than that will certainly send up questions of doubt. Your lender will definitely use any means of investigation it takes to find out more about the details of your financial situation.
Things to Remember
Although it may make you extremely uncomfortable to be treated as a “less than desirable” client for your completely ambitious choice to be self-employed, don’t give up! If you come prepared and ready to play hardball with your lender, there shouldn’t be any reason you don’t get approved so long as you come correct and put on a good face. Follow this advice and it should be smooth sailing for you to find out how to refinance.
- Allow ample time for your loan to come to a close: No matter what it is, you never want to be strapped for time or looking for the answer you want at the last minute, especially when it comes to how to refinance. Make sure you’ve got all the time you need from requesting refinancing to the closing of the loan. The only person you’ll have to blame for things not working out in the end is yourself. If it’s going to be a rushed situation, don’t even waste your own time committing to the idea: save it for a later date!
- Prepare all of your documentation: You should certainly have all of the standard documents neatly organized and ready for review, but you should also have plentiful information on yourself and your business ready to share as well. Because you are your own boss, your lender doesn’t have a huge organization to fall back on when considering you for refinance. Make it easier on yourself and the lender by being completely prepared for everything coming your way.
- Expect extra investigation: In this Age of the Internet, we all use it as a tool to find out things we might not have learned otherwise and your lender is sure to be no different. They may let you know they looked you up on Google, and they may not. Expect that there is other investigation going on in the backdrop.
- Be responsive to requests: Make sure you acknowledge every comment, question or request you receive from your future lender, even if it’s something extremely simple. You will only make yourself look more responsible and trustworthy if you’re prompt and very reliable in your lender’s eyes. Be available and be professional!
- Focus on your endgame: Even if your lender annoys you with the inquiries they make, stay focused on what you’re there for and why you chose them: you’re likely to get a very good deal out of it all. It might be stressful and hard to deal with, but there is a prize that waits for you at the other end that you will certainly be more than happy to have when you get to it.
Once the process of how to refinance is all said and done, you will most likely be giving yourself a huge pat on the bat. You can work for yourself and still manage to find out how to refinance with your unique income. The lower monthly payments and interest rate you leave the table with will have been well worth the headache and constant inquiries into your business. Don’t get discouraged and believe that you don’t know how to refinance!