Question: I currently have a mortgage balance of $207,000 with a conventional loan. My house is valued at about $225,000. I was unemployed for about six months last year so I had to run up some credit card balances and my credit score dropped to about 670. Is there a chance I can qualify for refinancing?
Answer: As you are obviously aware, mortgage lenders have pretty strict guidelines for loan qualifications. On a refinance, a lender will look at your home equity, credit history, job history, debt-to-income ratio and assets to evaluate your ability to repay the loan.
While your credit score may be an obstacle to qualifying for a conventional loan, you may also consider an FHA-insured mortgage for a refinance. Some homeowners don't realize that FHA loans are available for anyone who meets the credit qualifications and the mortgage loan amount limits, regardless of whether they are buying a home or refinancing.
Here are some reasons an FHA mortgage might help you:
Before you can make a decision on a conventional loan versus an FHA loan, you should ask a reliable mortgage lender to compare the costs of both types of mortgage loans for you and to assess your eligibility for each. Once you know those two things, choosing the proper loan should be a straightforward decision.