Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Nov 29, 2011

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If you apply for a refinance loan and a lender declines you, in most cases it is very unlikely a different lender would approve you.


Rather than filing with different lenders, you should spend your time improving your chance of qualifying for a refinance. There are a variety of reasons of reasons why a lender might decline your application—some in your control, while others are far beyond it.


Credit Score


Your credit score is something lenders take into serious consideration when determining whether they will qualify you for a refinance or not. Your credit score is a picture of your financial credibility, and is one of those factors that is in your control.


If there is room for improving your credit score, start working on raising that number by making all payments on time. Making good on payments and alleviating debt are two large factors that determine one’s credit score.


You should also be wary of opening new lines of credit, and taking out more credit cards. Lenders want to see your debt-to-income ratio lower, and the more debt you take out, the longer it will take to do so.


Home Equity


The equity in your home plays a large part in whether or not a lender will take the risk of issuing you a refinance loan. Equity is the difference between the home’s actual worth and the balance of the existing home loan.


While home equity is largely beyond the control of an individual, there are ways to give it a helping hand. If you have a large amount of cash savings, you can pay down your loan balance, resulting in a larger gap between your home’s worth and your loan’s balance.


Another consideration, albeit an expensive one, is to improve your house with additions of some sort to improve the value of the home.


Lower Your Standards


Lowering your interest rate standards can also help in the qualification process. With today’s record-breaking low interest rates, everybody wants to obtain the 3 or 4 percent rates. Unfortunately, those rates are usually reserved for prime candidates: those with great credit scores and home equity. If you don’t qualify for those low rates, save to pay more points on the refinance, or perhaps you should consider settling for a slightly higher rate than those rock-bottom numbers.