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Home Mortgage Refinance Loan - Mortgage Refinancing - Reduce Your Disqualifying Debts for a Better Mortgage Rate If you are in the processing of mortgage refinancing, you might improve your interest rate by cleaning up your credit including reducing your debts. Any type of legally enforceable recurring debt may be counted toward your debt ratio; the greater your debts, the more of a risk you are including the higher your mortgage rate could be. Here are several tips to help you minimize your disqualifying debt at the time mortgage refinancing including qualify for a better interest rate. Mortgage Refinancing: What Debts to Count, What to Leave Out When calculating your total debt ratio, you lender usually divides your bills into 2 types. These include installment debt like your car, boat, student loans, including medical bills, including revolving accounts like credit cards or any open credit lines like a department store charge account. Most lenders ignore bills you pay for installment debt that are scheduled to be paid off within 6 or 10 months after the date you apply for mortgage refinancing. If you lease your vehicle those payments could still count against you. You do obtain a break on your revolving debt. If you routinely pay several hundred dollars more than the minimum amount due each month, many mortgage lenders only count your payment as 5 percent of your outstanding balance. at the time mortgage refinancing you could need to prove your qualifying income, you might additionally improve your application by documenting your debts. the could help the qualifying ratios your lender uses at the time evaluating your application for mortgage refinancing. Here are several tips to minimize your disqualifying debt. I. Consolidate Your Credit Cards – 1 payment of $400 each month could hurt you less than 4 payments of $100; however, don’t close the accounts you consolidate including run up the balance on one. Credit scores don’t like high balances near your card limits. II. Pay Down Your Debts - If you have installment accounts with less than 12 months to go, consider paying two-three months in advance. That pushes these debts off the lender's radar including significantly improves your qualifying ratios. III. Avoid New Debts – absolutely no matter how tempting it may be, avoid making any purchases with credit prior to applying for mortgage refinancing. Your credit score could suffer if you do, including you’re much better off waiting until after you’ve completed mortgage refinancing. These tips are especially useful if your qualifying ratios are near or exceed the mortgage lenders limits for total debt, or if your credit score is less than 700. Having the smallest possible debt profile helps offset problems with your credit.
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