A couple of thoughts about this article from the New York Times:
- It’s true. Anecdotally, I’d have to say that depending on the day, anywhere from 30-50% of the people who I discuss refinancing with are either not able to do it because their income has fallen or because property values have dropped. Now wait, you’re probably thinking, “I thought that the government was allowing people to refinance even if their mortgage was over 100% of the value of their property. They are, but there are a couple of caveats to that:
- The loan has to be with either Fannie Mae or Freddie Mac and a substantial portion of the market isn’t with either one of those. If you want to find out whether your loan is with either one of them, check Fannie Mae Loans or check Freddie Mac Loans to find out.
- If you have a second mortgage/home equity line of credit on your house and the combined balance of the two loans exceeds 105% of the value of your home (but is less than 125%) then you can still refinance, but the pricing adjustments that Fannie and Freddie charge are so extensive that unless your interest rate is over 6%, it’s probably not worth refinancing.
- If you are like a LOT of people in today’s economy, your credit score isn’t quite as high as it used to be. It might be because you’ve had struggles to make some payments on time, it might be because you’ve had some of the credit lines cut on some of your credit cards (thereby lowering your credit scores because you’ve got too much of your available credit tied up), it might be a variety of reasons. But the end result is the same. In order to get the best possible rate, you need to have either:
- A 5% equity position in your house and no second mortgage or
- A first mortgage of no more than 80% of the Read more