- 1). Get a rejection notice from the lender if you have not already received it. According to MSNBC, federal law requires your lender to give you this notice if you submitted a formal application for a loan. This notice explains why the lender rejected your application.
- 2). Request a free credit report from the credit bureau if the lender rejected your application because of insufficient or bad credit. There are three major credit bureaus: Experian, TransUnion and Equifax. If your credit caused the rejection, the lender would state the name of the particular bureau that provides your financial data to the lender in the rejection notice.
- 3). Improve your credit. Generally a credit score of at least 740 gets you the best mortgage loan terms. Review your credit report and request corrections for any inaccuracies. Increase your credit limit or pay your debts to reduce your used credit percentage to 30 percent or less. Request a rapid rescore from the credit bureaus to adjust your credit score quickly.
- 4). Increase the equity you have in your home by making a lump-sum payment or larger regular payments toward your current mortgage. Most lenders require that you have at least 20 percent equity in your property when you refinance.
- 5). Get a better-paying job, a second job or a pay raise. Lenders consider borrowers with higher incomes to be less risky. Aim to use 38 percent of your income or less to cover your mortgage payments. This strategy may take time because lenders usually require that you stay at a job for at least two years for the income to count in the refinance application.
- 6). Submit refinance applications to several lending institutions. Various lenders consider different factors when deciding whether to approve a refinance application, so you may find one lender that approves an application that has been rejected by other lenders. MSNBC reports that small, local banks and credit unions usually have more lenient lending standards.
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