There are a handful of ways to find the capital you need to run your business. In most cases you don’t need to look any further than your current portfolio. With property values on the rise equity positions have grown over the past few years. It is quite possible your home is worth much more than you may think.
Whether the property is a primary residence or investment property you may want to consider pulling equity out in the way of a cash out refinance. Even though rates have crept up over the past 90 days they are still well below historic levels. You can enjoy the benefit of a manageable monthly payment with the cash to infuse in your business any way you please. Getting approved has slowly gotten a little easier over the years but can still be a challenge if you do not have everything in order. Here are four tips to help get your cash out refinance approved as quickly and easily as possible.
- Shop around. Much has changed in the mortgage industry over the past decade. There have been sweeping changes regarding licensing requirements, programs and guidelines. It is quite possible that the loan officer you worked with is no longer in the business. Regardless of how long it has been since you took the loan out, it is a good idea to shop around. Whether you are looking to borrow against your primary residence or an investment property you obviously want to get the best deal possible. Shopping around doesn’t mean having every Tom, Dick & Harry pull your credit report. You should have one credit report that you use as a point of reference for everyone. Having everyone pull your credit could lower your score and have a major impact on approval. A loan for an investment property may be better suited for a mortgage broker who has a handful of lenders at their disposal. Whoever you use you should make a point to talk to at least three different companies prior to moving forward. A quarter point lower rate on a large loan amount can have a huge impact over the next thirty years.
- Review credit. If you are thinking about pulling equity out of your property you need to know where you stand before you start shopping around. One of the pillars of mortgage approval is credit. It is not a stretch to say that everything in the transaction is dictated by your credit score. This is especially the case if the property is non-owner occupied. There is a higher standard of approval for investment properties. In most cases your credit score needs to be a minimum of 680 with a 720 not out of the question. You can pay everything on time and still have a score just under the 720 mark. With just a few minor tweaks or paying off a small account you can get the boost to your score that you need. Without knowing what is on your report you are walking into the transaction blind. Always review a copy of your credit report prior to starting the transaction and talk to a credit specialist if your score is lower than you anticipated.
- Minor property repairs. In addition to a strong credit score you transaction is also directly influenced by the property value. If the value is not to a certain level, you will not get the approval you are looking for. For a non-owner-occupied property most lenders require 20% equity, or an 80% loan to value. Anything less can cause your loan to be rejected or your interest rate to be higher. Prior to getting too far in the transaction you should talk to a real estate agent to get an idea of what your value may be. They will look at recent comparable sales and current listings to come up with an approximate value. If you are satisfied with the range, you will know what you are getting into and move forward with the appraisal. One way to help maximize the value of your appraisal is by doing some minor property repairs. Appraisers will use rate data like current listings and recent transactions but are also influenced by what they see. A house with freshly painted walls, clean carpets and updated flooring will get the benefit of the doubt when comparing it to others. Before the appraisal take the time to remove any excess clutter, clean the property and make it as fresh and clean as possible.
- Prepare documents. To get the best possible interest rate you should aim to close in 30 days. This is possible if you supply your lender with whatever documents they need in a timely manner. It is a good idea to put all income, asset and employment items on your computer for easy retrieval. The odds are you will need them at some point, so you might as well get them ready. There is a point in most current mortgage transaction when the lender will ask for something that appears unnecessary. Instead of fighting with them you are better off dealing with it and getting the item over. The longer you make them wait the less days you must make your rate lock. Once your rate is locked you are on the clock, whether you agree with the item requested or not.
A cash out refinance doesn’t work in every situation but can be a great option to explore if your value has increased. Use these four tips to help get your loan closed as quickly and easily as possible.