Refinancing a Home Mortgage
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by: marciafreeman
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The end of March, consumers were delighted to see the interest rate for the average home mortgage still at historically low levels. The Federal Reserve made a decision to keep rates low and many analysts expect them to stay fairly low for the remainder of 2009. In the current economic downturn, it is welcome news for potential buyers and current homeowners interested in refinancing a home mortgage. Lenders, however, have adopted much more stringent lending requirements since the credit crisis and decline of the real estate market. A better credit score, cleaner credit history and more money down are now required for most loans. That means that more home mortgage applicants than ever before are being turned down. Those who currently own homes and apply for refinancing must meet the same standards. The best rate loans now need equity percentages of 20 to qualify and credit scores of 680 or higher. Having sufficient equity to qualify has been a challenge for homeowners in markets that experienced a significant drop in values. Part of the new stimulus plan introduced by the Obama administration is designed to help those who keep up with their mortgage payments, but whose home values have dropped so much that they now have little or no equity. Consumers who are under water with the mortgage, however, will not qualify to refinance with the program. Those who have at least 5 percent equity in their homes will qualify.
Some consumers think the home mortgage rates will decrease even more, so will wait to refinance until then. They may be right and snag an even lower rate in the future, or wish they would have grabbed the lower rates. One of the risks for homeowners who are in areas hit with declining prices is that the longer they wait, the more the value of their home (and, consequently, their equity) will decrease. Consumers who wish to take advantage of the current low interest rates to refinance their home mortgage should do some simple calculations to determine if such a move makes sense for them financially. The first task is to add up how much the refinancing will cost. If you only focus on the potential savings and do not factor in the costs, you are missing an important piece of the picture. For those who will be able to break even and begin to reap the benefits of the lower monthly payments before they plan to sell their house, refinancing is generally a sound financial decision. Similar Articles Mortgage payment calculator ...
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