You know how retail stores often offer deals to people who take out a new credit card – deals that loyal customers who already have the card do not get? Well, the same thing happens if you bought a home when interest rates were high, and then they drop. New buyers could actually be getting a better deal than you got. With a mortgage, you have a chance at getting the deal, though, which you typically don’t at the retail store. You can refinance your mortgage to get the low interest rate if you qualify. The problem is if you don’t have an income you probably won’t qualify. Don’t give up, however, because you just might be able to refinance even without income.
Get a no documentation loan. A no documentation loan (no-doc for short) means that you do not need documentation of income. You might be able to refinance using this strategy, but you probably won’t qualify for the lowest rate. Forbes reported that people are getting no-doc mortgages by showing the lender they have at least six months of mortgage payments in savings. No-doc loans are typically for the self-employed or for business owners.
Ask a friend or relative to cosign for you so you can refinance. Just make sure you can actually make your payments and not burden your co-signer with them. If you don’t pay, your co-signer is legally responsible for making the payments. Making your co-signer assume your debt is the quickest way to end a relationship.
Think about applying for a loan modification. If the reason you want to refinance is that you can no longer afford to make your mortgage payments and you don’t have an income, a better solution for you is a loan modification. You would approach your lender to modify the terms of your loan. Lenders rarely reduce the principal, but they are sometimes willing to lower your interest rate or stretch out the term of your loan.
Make sure all your ducks are in a row. Besides income, lenders look at other factors to determine whether you will be able to refinance. They like to see a high credit score: 720 or more. They prefer you have equity in your home of at least 20 percent. You cannot have a second mortgage or a home equity line of credit outstanding – you would need to pay that off before you apply.
- Don’t rely on unemployment benefits to show proof of income because they end after a certain period. This means lenders do not count your unemployment checks as income.
Laura Agadoni has been writing professionally since 1983. Her feature stories on area businesses, human interest and health and fitness appear in her local newspaper. She has also written and edited for a grassroots outreach effort and has been published in "Clean Eating" magazine and in "Dimensions" magazine, a CUNA Mutual publication. Agadoni has a Bachelor of Arts in communications from California State University-Fullerton.