How to Refinance a Mortgage with No Equity

Property values are continuing to decline. Lenders are requiring higher credit scores and less risk for mortgage financing and refinancing. If you don’t have much equity in your home but you have a good credit history you may still qualify if you want to refinance. A lot of homeowners are seeking to refinance to take advantage of some of the lowest interest rates in recent history. There is a new mortgage program that you may want to check into. It is called Refi Plus and offers refinancing up to 105% of the recent appraised value of your home. The steps below are difficult. You will need to have available two years of income tax returns with W-2’s. You need copies of your checking account, savings account, and retirement account statements. You need the appraisal and a copy of your deed. You need your mortgage statement with the account number and the phone number of your lender.

Step 1: Call a lender that specializes in the Refi Plus Program. You can look on line, check with your current lender, or ask family and friends for contact information of these lenders. Ask the lender is your loan is a Fannie Mae (FNMA) or a Freddie Mac (FHLMC) loan. You must be serviced by one of these in order to qualify for this program. See if you are paying Private Mortgage Insurance (PMI) on your mortgage. If you are, it will be good news to you that the new loan will not require PMI even though you are financing as much as 105% of the home’s value.

Step 2: If you are qualified for the loan program ask the lender how to begin the application process. The lender will be able to give you an estimate of your closing costs that will be added to your new loan amount. After the lender has reviewed your application he will send it to underwriting. If underwriters approve, you will begin the mortgage process. The lender will ask for a lot of documentation and you should get them to him as soon as possible. You will have to give permission for the lender to obtain a new appraisal on your home if you have not provided one. See if the lender will lock in your interest rate at this point.

Step 3: After the appraisal is in the lender will let you know what your property appraised for and will let you have the funds you requested if they are not greater than 105% of the new value of your home.

Step 4: Tell the lender who closed on your existing mortgage and provide the lender with any insurance information you have on the home. You will be told the closing date they all agree on.

Step 5: As soon as Housing and Urban Development (HUD) closing statement is available ask for a copy. Go over the statement with the lender and make sure you understand. Go to the closing and ask questions there. After you understand the documents you are asked to sign, sign them. You have successfully closed on the refinance at this time. You will not be given a check for the proceeds of the note for at least three days. The federal government requires that a three day period is allowed for you to consider your refinance before you are given the funds on the fourth day.

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