Credit Report Q&A

Refinancing Outside the Making Home Affordable Plan

Dear myFICO,

I've read through the details of the Making Home Affordable plan and I'm fairly sure that I won't qualify for any sort of mortgage relief. I still want to refinance because the rates I see advertised today are much lower than the rate on my current mortgage. How should I go about trying to get better terms on my mortgage?

Indianapolis, Indiana

Dear Marco,

Even though you believe you're not eligible for mortgage relief under the Making Home Affordable (MHA) plan, it might still be a good idea to reach out to your mortgage servicer and explain your current situation. Your servicer may be willing to work with you even if you don't qualify for mortgage relief under MHA.

Many homeowners express concern over reaching out to their mortgage servicer because they believe that their servicer will view this as a sign of potential mortgage trouble and therefore may take some preemptive action against the homeowner. This is not the case. Your mortgage servicer cannot modify the terms of your loan just because you have inquired about receiving help with your mortgage.

If you've determined that you aren't a candidate for mortgage relief under MHA, you may still have an opportunity to get a better rate on your mortgage. While there are currently attractive rates available, to qualify for the best rates you should ensure that:

  1. Your credit is good – we always recommend checking your FICO scores prior to applying for a home or auto loan. Today, having good credit is more important that in years past, as many lenders have tightened up their underwriting practices.
  2. You have sufficient equity – if you are looking for a loan for more than 80% of the value of your home, it may be difficult to get the low rates being advertised. Do a bit of research to see what your home is worth and what you owe on your current mortgage.
  3. Your income is properly documented – the days of "stated income" are a thing of the past, so make sure that you can verify your income. If you are using your spouse's income to qualify, you'll need to document his/her income as well.

After you've verified these items, you should shop around for the best rates. Your FICO score takes into consideration rate shopping for certain types of loans, so don't worry about multiple inquiries affecting your score. For more about rate shopping, read this article. We wish you all the best in finding a mortgage that works for you.

myFICO Team

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