Diminished Chances of a Refinance ... - Landscaping and Real Estate

After the S&P downgraded the credit rating of the US, mortgage rates are around 50-year lows. Though this can be surprising news for the struggling homeowners as most of them were expecting high mortgage interest rates, yet there is a twist in the story. Mortgage refinancing may seem to be the best option with record low interest rates, considering the gyrations in the stock market in August, but without enough equity in your home, opting for a refinance mortgage may become a difficult option. According to a recent survey according to Freddie Mac, the rates on a 30 year fixed rate mortgage averaged at 4.23% and 3.39% on a 15 year term fixed rate mortgage. However, the biggest problem despite such low rates is that the struggling homeowners cannot go for refinance. Who is the key culprit? Home equity!

With the present debt situation in the United States of America, most homeowners across the country are grappling with low equity or even with negative equity in their homes. As per the valuable advice of the mortgage experts, while refinancing is even possible with equity as low as 3%-5% , it may not be worthwhile enough after taking into account the mortgage insurance and the closing costs that you may be subject to. However, if you don?t have enough equity in your home, you can still qualify for refinancing your mortgage by utilizing the government refinancing program known as the HARP.

Home Affordable Refinance Program can become a tough option for all those homeowners who have got a second mortgage and with mortgage insurance. The lenders will also require checking whether they have a steady income. Without enough income, the mortgage lenders can never assure or guarantee the repayment affordability of the homeowners. If the homeowners have gaps between their employment years, this implies that the person is not consistent in anything and therefore the interest rates will be higher on the mortgage refinance loans. If you?re a homeowner who is only relying on self-employment, you may also find it difficult to qualify for the HARP plan.

Yet another hurdle that the homeowners have to face is that of a lagging credit score. The three-digit number that you need to have in order to get a mortgage loan with the best rate is 740. Though it is not that you can?t get a mortgage loan with a score that is lower than 740, yet you can just forget about getting a favorable rate. If you?re credit-challenged but cash flush, you must be aware of the fact that taking out a 15 year fixed rate mortgage would certainly be a better option as they don?t change the interest rate based on the credit score.

Therefore, if you?re looking for ways to repay your mortgage loan by going for a refinance mortgage, you must take into account the new stringent rules that have been brought in the mortgage industry. Consider the most apt solution for your budget and your affordability so that you can make timely repayments without having to fall back on your other debt obligations.

Source: http://www.flamingolandscaping.com/219/diminished-chances-of-a-refinance-loan-for-struggling-homeowners-due-to-lack-of-equity.html

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