Mortgage Rates Keep Falling! Can You Refi?

Mortgage rates continued to fall today as the Federal Reserve furthers its action plan to help stimulate demand for homes.  Freddie Mac announced that mortgage rates that are hovering around 5.19% this week for a 30-year fixed mortgage haven’t been this low since 1979.  Today rates were at 5.0%.  Now we’re back to 1971! Earlier this week the Fed cut the federal funds rate to a range of 0 to .25%.As mentioned in the last post, rates are expected to continue falling into January when they may hit 4.5%!

What does that mean if you are trying to refi? Real estate loans always come in two parts: the borrower and the property. Each has to qualify. Banks now, of course, have considerably tightened their lending standards. Gone [for the most part] are the sub-prime loans, the option ARMs and the stated income, Alt-A,  loans. Now, you will have to qualify for your mortgage, so you need the income. And, you still need good credit. Above 720 is for primo rates with descending steps down to about 680. Below that, you may have trouble getting the loan.

That’s one part. The other part of the loan, as always, is your house. This is where things get very dicey as potential refiers have to come out of denial and admit that their home has lost probably at least 30% of value. Banks today will give primo rates only to those wanting loans of 75% LTV, meaning you have at least 25% equity in your home or property.

Psychologically, all of this is very hard to swallow. The enticing cheap homes are there for buyers with income. Unfortunately, the unemplyment rate is soaring. The great deals on refis are there now, too.  Then comes the kicker: prices have dropped so much that even good borrowers may not be able to refi because they no longer have the equity they need. Go figure.

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