When Refinancing is a Good Option

[Katie]

My husband and I had been talking about refinancing our house to a fifteen year loan while interest rates are so low. We currently have an interest rate of 7.25% and a 24 year term remaining on our loan. My credit is very good and we have had a lot of ups and downs with trying to improve his score. Well today we met with a loan officer and there are some things that I wish I would have known.

I felt confident going in to the bank, after all my credit score is fairly high. As we sit down and talk with the loan officer he lets me know that my score will not be taken in to consideration as they only look at the lowest score. My heart sunk. He saw the disappointment in my eyes so he suggested that I take out the loan only in my name so they could still give me the best possible interest rate. Ok, I thought, this made me feel a little better.

He punched all of my information in the computer. Which included my last four pay stubs. The results came back. I missed it by a mark, my income alone was not enough to get the loan. Apparently a rule of thumb is you can only get a loan for three times your annual salary minus any existing debt. My heart sank even further.

Our next option and only option was to put all of my husbands information in with mine and see if his credit score would qualify us for the loan. The lowest credit score they would take was a 620 and the last time we checked his score it was at a not so great 612.

The loan officer informed us that even with the lowest score acceptable (620) that we could get a 4.3% interest rate on a twenty year loan and possibly a lower rate if we chose the fifteen year loan. My confidence came back to me. With this rate we could get a fifteen year loan and only pay twenty four dollars a month extra. I would definitley trade in nine years worth of payments for twenty four dollars a month. Great I thought.

As I sat with anticipation just waiting to here if my husbands credit score was high enough, the unexpected happened. The loan officers computer froze up!! He was not able to process our application. Once again my heart sank...

The loan officer printed out our information and told us that he would have to give it to someone else to process. He apologized and sent us on our way out letting us know that if they need any more information someone would call us.

Now we are just sitting on the edge of our seats, crossing our fingers, praying, and waiting for a phone call.

[devoutfan]

Why is your husband's credit so low? The reason I ask is that he can improve his credit immensely by paying off the majority of his debt if the problem is having "too much debt."