How to Refinance a Home That's Dropped in Worth
If your house has fallen in value, it is still possible to refinance your home mortgage. The magnitude of the decrease dictates the number of alternatives you’ve got a possibility of being approved for. If your home value has declined to an amount less than the balance left on your house loan, you’ll probably find a government-sponsored alternative. If you are not underwater on your mortgage, then you might qualify for some form of traditional refinance.
Figure out the current market value of your home. You can estimate this by contacting a real estate agent who can look at comparable properties in your area. Several websites offer a similar service. As an alternative, you can hire a skilled or contact your tax assessor’s office and ask for an appraisal. Realize, however, that for some refinances, the lending company will evaluate your house anyway to determine its current market value.
Get in touch with your current lender. You can get the phone number in your monthly statement. Tell the lender you’re thinking about a mortgage refinance. Explain the value of your residence concerning the balance left on your house loan. This information will help the lender decide how to proceed.
Talk to the lender concerning government-sponsored mortgage aid programs if you’re underwater on your mortgagemeaning you owe more on it than your house is worth. If the amount you owe on your loan is less than 125 percent of their property value, you might qualify for a refinance under the Making Home Affordable program. If the loan-to-value ratio exceeds 125 percent, the FHA Short Refinance could be a better choice.
Ask the lender about a traditional refinance if your house worth has dropped, but not to a level which brings it below the main balance remaining on your loan. The bank will likely schedule an appraisal before it determines if it can offer you a mortgage refinance. You might be eligible for a no-appraisal refinance, such as one throughout the FHA. As FHA.com notes, however, if you go for this choice, you’ll pay closing costs up front and relinquish the choice of taking out extra money –a cash-out refinance–from your home’s equity.
Prepare the files you need to refinance. The lender will let you know precisely what you require. The required documentation varies based on the type of refinance you employ. In just about every situation, even a streamline refinance, you’ll have to confirm employment, income and expenses at least. You will need to assemble documents such as savings and checking account statements; charge card, auto loan and student loan statements; and taxation returns and paycheck stubs.