Refinancing is a smart move for many mortgaged homeowners right now, but it’s not a slam dunk.
More than 90% of home purchase mortgages get approved, but just 75% of refinance applications are approved, according to LendingTree. In the D.C. market, it’s slightly less than that, at about 72%.
Excellent credit is important when it comes to refinancing a mortgage loan, but it is not the most important thing for underwriters. Unlike a purchase mortgage, the first thing a bank will look at is home equity.
“When you do a purchase mortgage, there are many programs that allow you to get a low down-payment mortgage, for example, maybe 5% down or as little as 3%,” LendingTree chief economist Tendayi Kapfidze told WTOP.
“But for a refinance, you want to keep that LTV [loan-to-value] at or under 80, so you will have to have equity that gives you at least 20% equity.”
It may be harder to qualify for a refinance, but they are still overwhelmingly approved. And for some homeowners, it’s poor personal financial planning not to try to refinance an existing mortgage.
“It’s really kind of disappointing that there are not more people taking advantage of the opportunity to refinance. You can save hundreds of dollars a month, and tens of thousands of dollars over the life of your loan,” Kapfidze said.
The rate on a 30-year mortgage is currently almost 1.25 percentage points lower than just a year ago, a significant difference when it comes to the monthly payment.
