refinancing obstaclesCurrent mortgage rates are still low, so it’s still a great time to refinance! While refinancing is a great option for some homeowners, it’s not as easy for others. Here are some potential refinancing obstacles that you need to keep in mind:

Poor credit

This is one of the most common refinancing barriers. If you intend to refinance, your lender will require you to have a specific credit score. A good score allows you to enjoy good refinancing rates. Most lenders will require you to have a 740 credit score as a minimum requirement. Some may ask for a higher one. The upside is that if you intend to use any of the government-backed loan programs such as FHA or VA loans, you may get refinancing with a lower credit score. There are certain programs that will not take your credit score into consideration but you need to have a minimum credit score of 640 to qualify for most programs.

Underwater mortgage

An underwater mortgage refers to a loan that has a higher balance compared to a home’s free-market value. This kind of situation makes it difficult for you to refinance your home. If you have an underwater mortgage, your only bet is to seek assistance from programs designed for homeowners in your situation. A good example is the Home Affordable Refinance Program (HARP). This program will help you to get financing.

Inadequate income

This is another major obstacle that most homeowners face when they want to refinance their homes. Many people are still trying to recover from the global financial crisis. Some people were forced to take pay cuts to retain their jobs and this means that they now find it difficult to make their mortgage payments. It is important to note that a single missed payment can have an adverse effect on your refinance request. Most of the lenders are only willing to offer refinancing loans to individuals who have demonstrated that they can make regular payments on their mortgages. If you are finding it difficult to make the payments, the lenders will consider you a risk and they will deny your application.

Mortgage insurance

Homeowners who make mortgage insurance payments are less likely to qualify for refinancing. You will be unable to qualify for the Home Affordable Refinance Program if you have this form of insurance. You may still find a lender who is willing to make an exception but it will not be easy.

Jumbo loan

If you have a jumbo loan, it means that your mortgage exceeds the limit that has been put in place by Freddie Mac and Fannie Mae, these are the two agencies that have been authorized to purchase mortgages from lenders. In most counties, this kind of loan is over $417,000. It is difficult to qualify for a jumbo loan because you need to have an excellent credit score and make a bigger down payment. Some lenders are reluctant to offer refinancing for homeowners who have this kind of loans.

If you intend to refinance your home to take advantage of the current mortgage rates, you need to review your situation and determine if any of these obstacles apply in your case before you approach a lender.