Refinance 911: Why Can’t I Refinance My Mortgage?

Mortgage in UtahWhen mortgage rates drop, most borrowers automatically consider refinancing their mortgage to take advantage of reduced rates. But, not all borrowers will actually qualify for refinancing. Below, Utah Loan Pros shares the top reasons some borrowers don’t qualify and their possible solutions.

An Extremely High Loan Amount

If your loan amount is around that of jumbo loan proportions, and you have a high loan-to-value ratio and low credit rating, you may find it difficult to qualify for refinancing. Instead, you can consider applying for a cash-in refinance where you pay money during closing, so you can lower your mortgage amount below the limit. This can also get you a reduced interest rate and loan-to-value ratio.

A High Loan-to-Value Ratio and Lack of Home Equity

Among the top reasons for being denied a refinance loan is insufficient home equity and consequently, a loan-to-value (LTV) ratio that is significantly above the conforming limit. Don’t fret; there are some loan programs out there that are not that strict concerning loan-to-value ratios. One of these programs is the government’s Home Affordable Refinance Program (HARP) that does not have LTV ratio limits.

Less than Stellar Credit Score

Yet another common roadblock to refinancing is having a low credit score. If your credit score is below the lender’s allowable limit, you won’t qualify for refinancing. The most popular refinance option for borrowers with low credit scores is the FHA Streamline Refinance program. But, you can only use this refinance option if you’re refinancing your existing FHA loan. Otherwise, take some time to get your financial affairs in order and then shop around to find reputable mortgage companies willing to work with you.

Low Income

If your current income is not nearly as high as what you receive back when you took out your mortgage and if you’re over the maximum debt-to-income (DTI) limit, you won’t qualify for a refinance. Although producing more money at the drop of a hat isn’t possible, you can consider repaying some of your debts to lower your DTI ratio, add a co-borrower so you can qualify, or look around and find a mortgage company with more lenient limits.