Q: I have a first mortgage for $304,000 and a second mortgage for $74,000 for a total of $378,000 in mortgage loans. I’m current on my payments, but I want to refinance.

Unfortunately, my mortgages are not with Fannie Mae or Freddie Mac. The value of my house has dropped in my neighborhood, but my income is $98,500 per year. What can I do?

A: I’m afraid your options to refinance your mortgage loan are limited. The key to your ability to refinance your loan is how much the house is worth. If your mortgage loans aren’t with Fannie Mae or Freddie Mac, you’ll need at least 20 percent equity to refinance. So, if your house is worth $550,000, you can probably refinance your mortgage loans – if your debt-to-income ratios work.

Lenders are fairly strict about debt-to-income ratios. With an income of $98,500, you may be on the edge of affordability. It will depend on what other debts, savings and investments you have.

One other thing to consider is how much you’re paying in interest. You didn’t share that information with me, but right now, interest rates are just over 5 percent for a 30-year fixed-rate conventional mortgage loan ($417,000 or less). If the interest rate on your mortgage loan isn’t much higher than that, it may not be worth the cost or headache of refinancing now your mortgage. The costs to refinance may outweigh the benefits to you of lowering the rate.

Please talk to a good mortgage lender and discuss what options you have to refinance. If your primary mortgage loan is an adjustable rate loan and it is due to readjust soon, you may be surprised to find out that your interest rate might actually fall quite a bit with the readjustment. The new lower rate may only last for one year, but that year may give you some breathing room to assess your options.

Read more about refinancing mortgage loans here