The 3 Best Ways to Get Your Mortgage Refinance Approved

We all are facing uncertainties right now, and getting your mortgage refinance approved might be one of them. According to CNBC, mortgage applications are down 35% from last year and about half of normal volume in California. On the other hand, refinances are skyrocketing. On the week of April 10th, The Mortgage Bankers Association’s Refinance Index was 192% higher over the same week in 2019. 


With increased volume and banks navigating limited lending capabilities, you need to make sure your refinance application is as strong as it can be to ensure approval and the best rate. Here are 3 key tips to make sure your mortgage refinance application is approved.


Use a Credit Score Above 680

It’s always great to have as high a credit score as possible when applying for any home financing to receive lower rates from lenders. At a time when lenders are facing such extreme refinance application volume and economic uncertainty, they are becoming even more selective about who they approve and the minimum credit score they accept.


Many credit scores that would have been approved for a home refinance without a hitch a few months ago are now struggling to get approved. Of the big banks, Chase Bank increased its minimum credit score requirements, requiring approved applicants to have a FICO score of 700 or higher. Others have restricted their guidelines and eliminated some programs altogether.


To raise your credit score for a better chance of loan approval and a better refinance rate, work to pay down any outstanding debt (especially credit card debt), lower your debt utilization ratio, and don’t close or open any new credit lines.


Showcase Stable Employment

Many people have lost their jobs or are facing employment uncertainty right now. Lenders understand that but when approving applicants, they would rather lend money to those with stable employment than not.


In addition to income verification, Freddie Mac and Fannie Mae are asking all lenders to provide proof of continuity of income. Basically, they want evidence that your income or employment will not be eradicated due to COVID-19 concerns and impacts.


One of the biggest mortgage lenders in the United States, United Wholesale Mortgage, now requires applicants to re-verify their employment at scheduled closing for all loans. Other lenders could potentially adopt this same policy, so it’s good to keep in mind when planning for your transaction. 


This kind of requirement is why it’s important to work with a lender – and a broker – that can work with your needs and find the best solution while securing you a low rate.


Be Flexible on Cash-Out Loan Needs

Cash-out refinancings are harder to come by right now, as some lenders are facing liquidity strains and low purchase demand from investors on new loans. We’ve seen both Bank of America and Wells Fargo recently raise their minimum FICO score for home equity borrowing to 720, and other lenders following similar routes. Rates on cash-out loans are also trending higher than they were a few months ago.


If you would like to take some cash out in your refinance, you still can, but you will need to work with the right lender.


How to Navigate the Refinance Market

Our best advice is to work with a trusted mortgage broker/advisor like Solidify to attain the best refinance transaction. Not only will an advisor like Solidify provide you access to multiple lenders – rather than shopping for them yourself – but you’ll have access to ongoing expertise as the mortgage environment evolves.

The goal of any refinance should be more than just a great rate: it’s an opportunity to improve your financial position. Your advisor will be there to help you during these market conditions and for years to come. 

Despite lenders’ selectivity, rates are favorable right now. Now is a great time to look into refinancing your mortgage and saving money. Feel free to chat us directly, schedule a free consultation call, or call us directly to talk to a Solidify mortgage expert today.