More Stringent Home Mortgage Lending Standards
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by: marciafreeman
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Home mortgage interest rates the third week of March were still hovering around 5 percent. Most experts predict that the rates will slowly creep back up, but remain low for the rest of the year. In the current economic downturn, it is welcome news for potential buyers and current homeowners interested in refinancing a home mortgage. The one hiccup for some borrowers has been the tighter standards lenders now have in place. Borrowers must now have higher credit scores and put down larger down payments to qualify. 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. Many lenders are now requiring at least 20 percent equity and a credit score of 700 or higher to qualify. The biggest hurdle for applicants in the areas of the country where values have dropped the most is having enough equity. One of the goals of the new government housing aid plan is to assist those responsible homeowners who no longer have enough equity, due to a decrease in the value of their homes. But those who owe more than 105 percent of the value of their home will not be eligible for a refinancing under the plan. A minimum of 5 percent is required in equity to apply for refinancing.
Many who are considering refinancing a home mortgage are waiting to see if the rates drop below 5 percent. Their gamble may pay off, or the rates may creep back up. 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. Those who are looking into home mortgage refinancing now with the low rates should make sure the benefits outweigh the costs for their particular situation before jumping in. 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. Topics of interest Mortgage calculator Mortgage loans Refinance home loan Mortgage refinancing Mortgage calculator
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