Most times, a lender won’t agree to simply remove a co-signer’s name from the mortgage note. Usually, you or the co-signer must pay off the loan or you must refinance the loan in your name alone. If your income and credit score have improved since you applied for your original mortgage loan with a co-signer, refinancing is an option that allows you to change the terms of the loan.
Ask your lender if you qualify to refinance the mortgage without the co-signer’s name on the loan. To get the loan on your own, you must meet the requirements using only your income and credit history. The lender will want to know how much money you have coming in each month as well as the amount of any assets you have that can be liquidated into cash.
Check to see if a prepayment penalty applies for paying off your existing loan early. Look over your mortgage contract for a clause describing whether a prepayment penalty will apply. A prepayment penalty may apply if you got your mortgage at a lower interest rate. Generally, prepayment penalties don’t extend for more than 3 years from the time your first mortgage payment is due.
Request a copy of your credit report before actually applying for a refinance loan. Your credit score is a factor in whether you get approved for a loan on your own. As a rule, lenders like to see a clean credit report for at least the past 12 months. Credit reports are constantly changing so check to see that all the information listed on your report is accurate. Dispute any mistakes you find.
Compare rates and lender fees. Another lender may be willing to offer you a better refinance deal. Talk to FHA-approved lenders. The Federal Housing Administration’s guidelines for getting approved for a loan aren’t as strict as those of conventional lenders. Despite previous credit problems, it may be easier to qualify for a mortgage on your own through FHA if you meet the employment and income standards.
Gather together copies of your W-2s, pay stubs, tax returns, bank statements, retirement plan statements and any records showing other investment income. When you are ready to apply for a refinance loan, you will need to show the bank documentation proving your employment, income and assets. Typically, a mortgage lender wants to see pay stubs and bank statements from the last 30 days but may ask you to go back farther. Provide W-2 forms and complete tax returns from the previous two years.
Find out what your home is worth. Before paying for a professional appraisal, ask a local real estate agent to do a comparative market analysis. However, when you apply for the refinance loan, the lender may order an appraisal to confirm your home's value.
Close the refinance loan transaction to pay off your current mortgage. When the refinance is approved based on your financial information and credit history, you'll sign new loan documents listing your name as the sole borrower.
Items you will need
- Original mortgage contract
- Credit report
- Financial documentation
- Property appraisal
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