A lot of people are looking for a way to save money every month. With interest rates so low, many homeowners are looking into refinancing a mortgage. However, around 1 out of every 3 homeowners will be denied. Here are some common problems homeowners face when they attempt to refinance a mortgage.

While refinancing is a great move for many homeowners, there are some hurdles that must be overcome before getting approved.

-Upside Down Mortgages
Many homeowners actually owe more on their mortgage than the homes market value. This is caused by a bad housing market, and an increase in foreclosures and loan defaults. Typically, a homeowner needs to have at least a 20% equity stake in their home to get approved for a traditional mortgage refinancing.

-Bad Credit and a Bad Mortgage Repayment History
While getting approved for refinancing with bad credit is not impossible, it is hard to do. Also, the benefits of getting a low interest rate are often negated by the additional costs and fees a homeowner must pay when refinancing with bad credit. Even more important than the credit rating though is the mortgage repayment history. If you have continued to make your home loan payments, yet have bad credit, this at least shows the mortgage lender or bank where your priorities are. This leads them to believe that even with bad credit, your home loan will be paid every month. Which in turn leads to a better chance of your getting approved for a mortgage refinancing.

-The Costs of Refinancing
Many homeowners are unaware that the cost of refinancing a mortgage can easily be thousands of dollars. In most cases, this money needs to be paid upfront before signing the actual mortgage refinancing deal. Sometimes, though it is not recommended, the costs and fees of refinancing can be rolled into the home loans total amount. While this is the only way for some people to get approved, it will also increase the amount you pay every month for the course of the home loan. It is best to pay all, or as much as possible of the costs and fees before signing a refinancing deal.

Even with some of these problems that homeowners must overcome, refinancing a mortgage can be a great decision. While every persons situation will be different, these are the typical problems that homeowners face when refinancing. Knowing about and preparing for these problems will increase the chances of your getting approved, and help you get the best deal possible.

-M Petrone

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