Shore up credit before you refinance

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Dear Dr. Don,
I am considering refinancing my home. I owe just under $80,000. The value of the house is approximately $140,000. I bought the house before I got married, so the mortgage is in my name only.

My husband has been unemployed for two years — no income and no unemployment compensation. We have three credit cards, two of which are almost maxed out. How will this affect a refinancing?

I am currently managing all the expenses, but it would be nice to free up some paycheck-to-paycheck money. What do you think my chances are? Should I even try to refinance?
— Motivated Mary

Dear Mary,
Since you’re qualifying on your income, you can do a repeat of your original mortgage and apply for the loan in your name.

I’m presuming you live in a noncommunity property state. Even if you live in a community property state, the fact that you bought the house before you married should allow you to keep the loan in your name alone. However, work with a real estate attorney to be sure.

It would be a good idea to get your credit score from at least one of the three major consumer reporting agencies — Experian, Equifax or TransUnion — to see where you stand. Check and correct your credit report if you see any errors.

If possible, pay down the credit balances on the two cards near their maximums to where they’re at about half or less of the credit line. Show you can manage credit and that you aren’t using credit lines to replace current income.

You could ask the card companies to increase your credit lines, but that would trigger credit inquiries that would have a slightly negative impact on your credit score.

Bankrate’s refinance mortgage calculators will help you figure out the savings from refinancing. The longer you plan to be in the house, the more sense it makes to capture today’s lower rates.

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