In times of financial prosperity, people are optimistic about purchases and financing. Consequently, many people have ridden the swelling prosperity of the past few years with little urgency or regret. Unfortunately, we now see what can happen during times of great uncertainty and financial instability with the advent of COVID-19.
Tapping into Your Home’s Equity
In times of financial need, homeowners have been able to tap into home equity by refinancing their mortgage. A cash-out refinance offers a homeowner the option of taking equity from their home without selling.
If a borrower has more than 20 percent equity in his or her home, it may be possible to utilize these funds. This is one good way of shoring up some personal financial resources, particularly with the current rates.
Refinancing Still Requires Lender Approval
Lenders still need to ensure that a potential borrower is a good financial risk. With unemployment currently up, it’s important to understand that lenders will be especially careful to investigate a borrower’s income and job stability. Job instability at this time will make it difficult to get approved for any type of mortgage refinance. The lender will want to see
- Documents that prove that you own the property. They will also want to see that taxes and insurance premiums are current.
- Proof of income such as pay stubs and tax forms
- Proof of any other income
- Debt to income ratio — depending upon the lender and loan type, there is a range of thresholds that a borrower must meet when it comes to debt load.
- Credit score and history — one of the fundamental pieces of information a lender looks at to determine a borrower’s creditworthiness
- An appraisal showing the market value of the home
Ways a Refinance Can Provide Financial Relief
For those who can qualify to refinance their mortgage in California at this time, there may be a great bit of potential relief.
- By switching to a lower interest rate loan or loan type, payments could be reduced.
- Many may find that they have enough equity in their home to be able to drop PMI payments.
- Taking cash out offers some money in the bank providing some financial stress relief and stability.
Peace of mind is often just as important as the financial aspects at times like these.
A Mortgage Professional Can Help
If you are considering refinancing your California home to help ease your current financial situation, let our professional Stockton mortgage brokers help.
We would be glad to look at the numbers for you and prepare a prequalification report. We are licensed to do business anywhere in the state of California. At H.O.M.E. Lending, we believe in community and helping each other through times of crisis. Call us at (209) 477-0262 to understand how refinancing your home may be a good decision right now.