Whether you want to lower your mortgage payment or access some cash for home renovations, refinancing your home
is a great way to access your home’s equity.
Self-employed borrower naturally have the goal of reporting as little net income as possible which can conflict
with a 2nd goal: qualifying for a real estate purchase or refinance! We can help you to make the right decision
to achieve both by working with borrowers and CPAs to achieve both goals. It’s not only the bottom line number
that matter, it’s the details inside the tax return that can decide the achievement of your financial goals.
There are a few steps you need to take to make sure that you’re ready to refinance. The more prepared you are up
front, the smoother the process will go. Here are a few helpful tips:
Review Your Credit Report
Any home refinance is going to involve a lender running your credit report. Before any bank looks at the report,
you should check it to make sure there are no surprises. You can obtain a free copy of your credit report once a
year from each of the three major credit bureaus (Experian, Equifax, and TransUnion).
Once you have the reports, work on correcting any errors you see and make sure that the report presents a stable
financial picture. Lenders like to see a low debt-to-income ratio and plenty of available credit. You may decide
that you need to hold off on refinancing for a few months while you pay down or consolidate other debt.
Estimate Your Home’s Value
Your home will be formally assessed as part of the refinancing process, but doing your own research ahead of
time will help you know where things stand and how much you stand to save by refinancing.
Sites like Zillow are great resources for checking out home values and recent sales in your area. Mortgage
lenders typically like to see that you owe less than 80 percent of your home’s value. If your research shows
that you owe more than that, you might want to focus on paying down your mortgage balance or waiting until home
values increase before refinancing.
Collect Financial Documents
Once your credit report is in order and you’ve determined what your home is worth, the last step in preparing
for a refinance is gathering all of the paperwork necessary to make it happen. If you bought your home a while
ago, you might have forgotten about all of the documents needed to complete the sale.
You’ll need pay stubs for proof of income, bank and investment statements, and tax returns from the past two
years. If you receive income child support, alimony, or other sources, be prepared to provide those documents as
well.
