The following is part of a post that I wrote in December of 2009. It’s strange how much of this is still true today! See the notes at the bottom!!!
Mortgage rates in Northwest Indiana, and the United States as a whole, have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government.
Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out.
The scarcity of credit not only hurts Indiana homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.
The issue here is twofold.
First, many homeowners who have purchased in the last several years using high loan-to-value products such as 100%, 102%, 125%, 80-20, etc. loans have seen their home values go down much faster than their principle has. For them, it is almost impossible to refinance if they own thousands, if not tens of thousands more than the current value. To make it worse, many of them are in adjustable rate products that could cause their payments to increase. For them, walking away may be an option. See previous post. We now know that this has had mixed results and has delayed the rebound in the housing market. There are options now…see below.
Second, it is estimated that 60% of those that are actively looking for a home may not qualify do to increased credit standards. Whereas a few years ago you could get a mortgage loan if you could steam-up a mirror placed under your nose, the minimum scores are currently 620 and trending higher (they are currently 640 for many lenders). If you are below this number, a 619 for instance, you will not qualify. Add a 30+ day late payment in the last 12 months or a new collection and you may be watching someone else move into your dream home.
My advice to those that are thinking about purchasing or refinancing in the immediate (or not so immediate) future… contact your loan professional now!
You really need someone to look at your credit report, as well as your income, debts, etc., to make sure that you will qualify. If not, there are options! For instance, 79% of all credit reports contain incorrect information and 25% have incorrect information that is significant enough to be rejected for a mortgage. If I cannot get you qualified now, you still may have options.
What if you are trying to refinance, but you are having credit issues and are behind on your home loan or have diminished family income and have been turned down? There may be options available to keep from losing your home at 877gethope.org.
The rates are currently at historical lows. Don’t miss the opportunity, as they are expected to start increasing in the next couple months. Well, they did. Then they hit even lower levels in May of 2012.
In Fall of 2011, the Obama administration introduced HARP, the Home Affordable Refinance Program. While the idea was good, the results were dismal. In March of 2012, HARP 2.0 was introduced and seems to be able to help many more homeowners who have higher interest rate loans and may be underwater on their homes but have continued to make the payments on-time. Since then, FHA and USDA have announced plans to assist Indiana homeowners refinance to get better interest rates with a minimum of paperwork required and potentially without having to get an appraisal.
If you have been hoping to refinance but your home is worth less than the mortgage balance, you may be in luck! Rates are very, very low and these new programs could potentially benefit a large number of homeowners who have been making payments each month on a home that has a 5% or greater interest rate and/or is worth lass than the current mortgage balance. If this is you, call me at 219-695-0369 or email scott@nwiloanguy.com to see if the available programs will benefit you. There is no obligation and it only costs a few minutes of your time.
Scott
Valparaiso, Indiana mortgage expert specializing in FHA, VA, HARP, and USDA Rural Development loans.