Due diligence should be undertaken into understanding the legal process of a Michigan refinance prior to application, so as to minimize the elapsed time between submission and the procedure’s final stages as outlined by the lender and associated bodies who have to process all the details.
Most people understand that credit rating is an important aspect by which to decide if an applicant is appropriate for a refinance. However it is not always taken into account which of the three major credit bureau ratings are used. The majority of mortgage lenders use Experian, Trans Union, and Equifax. Generally speaking, the higher the credit score the better, although a substantial credit history can be equally as important.
It is always best to have a clean credit history, and ideally the candidate’s history won’t be marred by liens, foreclosures, or delinquent accounts as this will obviously carry a higher risk to the lender. However, lenders still can accept application such as these, as long as enough time has passed since the last incident.
All mortgage lenders consider the initial down payment of the intended purchase and the final remaining equity after refinancing. Lenders have guidelines that state what the minimum down payment must be on any refinance. In general, both the down payment and remaining equity should be as large as possible. In addition, it’s beneficial if the assets can be or are liquefied. The money used for the down payment will have to have been in an account for a minimum length of time as specified by the lender.
It is always important for a lender to judge the risk involved by outlining the loan term and the purpose of the loan. Ideally, the loan term will be as short as possible as long as the applicant can afford the expense ratio. Cash out loans of loans that provide cash back at closing are a steeper gamble for the lender, and lenders are far more likely to approve loans only for the balance of the property.
Property types such as condominiums often have added risk involved, as there is always the possibility that the builder or homeowners’ association could go bankrupt and fail to uphold necessary maintenance on the property. It is for this reason that lenders’ guidelines are more stringent with condominiums or similar property types. Therefore, the property that carries the least amount of risk to the lender is that of a standard single family home.
A well-documented income history is crucial to anyone applying for a loan, especially those who are freelancers or own their own businesses. The longer the history, the better, and corresponding paperwork supporting all figures might have to be made available to the lender.
Upon review, the refinance application process can be full of caveats for both the candidate and lender to consider. Knowing this, the hopeful applicant should undertake due diligence from the outside to ensure the application is fulfilled as comprehensively as possible to minimize the delay caused by uncertainty, mis-communication, and bureaucracy.
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