Am I Eligible to Refinance My Florida Home?

 Posted on March 12, 2021 in Real Estate

If you have recently had a change in your financial circumstances--perhaps you lost your job, received a pay cut, or have taken on additional costs--the mortgage that has been affordable over the past decade may no longer be feasible. You may be concerned that because your mortgage exceeds your income, you will soon be on the path to losing your home. Without taking any additional action, foreclosure could soon be on the horizon. However, there are a number of actions that you can take before getting to this point, including refinancing your home.

What Is Refinancing?

Refinancing your home means replacing your current home loan with a new one. There are a number of benefits that refinancing has to offer, such as reducing your interest rate, cutting monthly payments, or tapping into your home’s equity when needed. Refinancing can also allow you to pay off your loan quicker or switch from an adjustable-rate to a fixed-rate loan. Refinancing your home may seem like the perfect solution to your financial difficulties; however, there are certain requirements that must be met in order to qualify.

Qualifications to Refinance

Before taking action to refinance your home, you must first be sure that you qualify to do so based on the following criteria:

1. Length of Ownership. If you just purchased your home last month, you will not be able to refinance. Typically, your name must be on the title of the home for at least six months before refinancing becomes an option. If you purchased your property with an FHA loan, this six-month waiting period may be increased to one year. You should consult your lender for more information if you purchased your home in the past year.

2. Credit Score. Your credit score is a key indicator of whether or not you will be able to refinance your home, as it is a reflection of your likeliness to repay your debts. Credit scores range between 300 and 850--the higher the credit score, the better your rate. Your credit score must be at least between 600 and 620 to be considered for refinancing.

3. Home Equity. You must have built up equity to qualify for refinancing. Home equity refers to the percentage of your home’s value that you actually own and the amount that you would get if you sold your house and paid off your mortgage. You will likely need to have 20 percent equity in your home in order to refinance. If, however, your home equity is less than 20 percent and you have a high credit score, you may still get approved to refinance.

4. Miscellaneous Debts. Your lender will take your other debts into consideration as well. Referred to as a debt-to-income (DTI) ratio, your lender will look at your total monthly income in comparison to your minimum monthly debt. This may include car loans, credit card debt, student loans, and more. Your DTI should be less than 50 percent to be considered eligible.

Contact a Fort Lauderdale, FL Real Estate Attorney

If you are struggling to meet your monthly mortgage payments, you should refer to a real estate attorney for more information about your options. The skilled team at Elliot Legal Group provides quality service to assist Floridians with their financial needs. Whether you are purchasing your first home, considering refinancing, or are on the brink of foreclosure, Attorney Gavin Elliot is here to guide you through the process. For help, contact our dedicated Broward County real estate lawyer at 754-332-2101 today.

Sources:

https://www.nerdwallet.com/article/mortgages/how-to-refinance-your-mortgage

https://www.rocketmortgage.com/learn/refinance-mortgage-requirements