According to an article in last week in the Wall Street Journal, after weeks of record low mortgage rates, refinancing may finally be taking off. Applications are finally up, just as Freddie Mac is reporting that the average 30 year fixed rate mortgage is at a record low of 4.44%, the lowest recorded in Freddie Mac’s history. Just a few months ago, in April, the rate was almost a percent higher at 5.2%.
The possible increase in refinance applications may be due to the drop in refinancing costs. No matter what the reason for the sudden increase in applications, many attempting to refinance their mortgages may be sadly disappointed. While there is interest, how many will actually convert to refinances is in question. With standards for qualifying for a home loan becoming stricter by the day, many trying to qualify could be turned away. Low credit scores, loss of job or reduction in salary are all things that many people across the country are struggling with and are all reasons for being turned away.
Another key issue in qualifying for a refinance is home equity. With many homeowners still faced with underwater mortgages, qualifying for a refinance is nearly impossible. “People who were underwater at higher rates one year ago are still underwater” said Douglas Duncan, chief economist at Fannie Mae.
While more than half of all homeowners could benefit from a refinance with the new low rates, according to the article only about 38% of those would be able to qualify. If you have a job and a good credit score and have equity in your home, the time to refinance could not be better, and even if you refinanced a year ago, it may be worth it to take a second look and refinance again.
“The irony is that it’s terrific for people who have jobs-it’s real economic stimulus. But for the guy who is struggling, he’s un-lendable,” said Brian Wickert, a mortgage banker in Butler, Wisconsin.
For those borrowers who are credit worthy, these low rates could mean not only a cut in your current monthly payment, but also a reduction in years left on your mortgage. According to Freddie Mac, many borrowers who are refinancing are going from 30 year mortgages to 15 or 20 year loans. With a new push for people to get out of debt, this is a sure way to cut your debt, if you can qualify.