Time To Refinance?

Monday, December 22, 2008

As mortgage rates have dramatically fallen over the last few weeks, many are wondering if now is the time to refinance.  This seems like a key topic of discussion around the halls of Prudential and the community at large these days.

Refinancing now may sound appealing, but keep in mind that there are still some hurdles involved in securing the money you need.

One statistic shows that new applications for refinances have tripled this month.  The fact that the Federal Reserve has promised to buy up $600 billion of mortgage debt and 30-year fixed mortgage rates have droped below 5% has a lot to do with it.  Rates today are the lowest we’ve seen in 50 years but some borrowers may still have some trouble completing the deal.

It’s still as important as ever to demonstrate at least 20% equity in your home.  With bad debt still weighing on the books of many large brokerage firms, showing at least 20% equity will be a key factor in qualifying from the start.  Beyond that, many lenders are requiring a credit score of at least 720 and a debt ratio below 43% for you to gain the approval you need.

For those in need of a Jumbo mortgage, you’ll find these are still expensive.  For a 5/1 adjustable-rate mortgage with an initial interest rate for five years and an annual reset, you’re looking at 6.6% on average.  Traditional 30-year fixed rates for Jumbo loans are hovering around 7.49%.  Home owners needing large amounts of money aren’t likely to gain anything positive from refinancing now.

SOURCE:  www.Realtor.org

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