You have little to no equity in your home, or maybe actually owe more than your home is worth.
Question: Can you refinance?
OK, so that is not a very definitive answer as to whether or not you can refinance if you have no equity in your home. But keep in mind there are a meriad of factor the come into play before you hear “Yes” as the answer. Here is some information that might help to guide you.
If your current mortgage is an FHA Loan
If your current mortgage is an FHA loan, you might be eligible for a Streamline Refinance. With this program, there is no appraisal required, therefore removing the equity issue. The program also waives all income verification, but you must be employed, have no late payments on your mortgage and meet the credit score requirements in order to qualify. Closing costs will need to be paid at closing by you OR via a lender credit, it is not possible to roll them into your new loan amount. In addition, the new payment (principal, interest and mortgage insurance) must be at least 5% better than the current figure you are paying.
If your current mortgage is a VA Loan
If your current mortgage is a VA loan, you might be eligible for an Interest Rate Reduction Loan. The program waives all income verification, but you must be employed, have no late payments on your mortgage and meet the credit score requirements in order to qualify. Depending on who your current lender is, an appraisal might not be required. If you do not qualify for an appraisal waiver, then your home will need to appraise for at least the amount of the loan you are applying for. You are able to pay for closing costs at closing, via a lender credit, or roll them into your new loan as long as you still meet the appraised value limit(if applicable).
If your current mortgage is a Conventional Loan
If your current mortgage is a Conventional loan you might be eligible to refinance under the Home Affordable Refinance Program (HARP). In order to qualify for this program, your loan must be currently owned by FannieMae or FreddieMac (click each to see who owns your loan). If your loan is owned by FannieMae or FredddieMac, then you could be eligible to refinance as long as the new mortgage does not exceed 125% of the value of your home. In some instances, you might be able to refinance up to 150% of the value of your home.An appraisal is required and you will need to provide all income documentation as well as meet all credit requirements. Depending on the percentage of negative equity, the interest rates being offered are quite competitive.
Not everyone will be able to meet the criteria required to utilize on of these programs, however, they do offer options for those looking to refinance despite the lack of equity in their homes. With rates still at some of the lowest levels ever, you should not hesitate to explore all possibilities.