Mortgage Rates: If You Can’t Qualify

The truth is not everyone can take advantage of either the home buying or refinancing market today, despite rates being at historic record lows right now. There are people who would love to lower their payment or buy a home at the record low prices some areas are seeing, but can’t. Why? The answer isn’t always easy, but for the most part these folks fall into three categories:

1) Those who have bad credit. Bad credit is no longer something that lenders can look the other way about. In fact, it’s probably one of the main reasons that people can’t get a mortgage in today’s market. Credit is tight, and mortgages are harder to qualify for than any time in recent history.

But the good news is that it’s the easiest problem to fix if you understand credit, know what steps to take to improve your credit, and have the patience and discipline to actually do what it takes to improve your credit. Doing this is almost never easy. It requires cutting back, saving, spending less, paying off debt and making sacrifices.

It’s a tough road, but improving credit is possible if one is willing to adopt an any-means- necessary approach.

2) Those who need a jumbo loan. Many think of “jumbo loans” – a loan over the conforming loan limit of $417,000 – as something only rich and famous folks get or think about. Not so. In fact, in many popular urban areas, a loan at the upper edge of the conventional limit barely has the purchasing power of a small starter home.

Most often the interest rate for jumbo loans runs at least one percentage point higher than smaller conventional loans. This means that the historically low rates that people are enjoying around the country haven’t made it to the most expensive homes. Ironically, these are the homeowners who would benefit most from lower rates.

There really isn’t much homeowners in this niche can do, other than keep their fingers crossed and hope that one day jumbo loans drop down to match the great deals that those with smaller mortgages are enjoying today.

3) Those who owe more than their house is worth. The third group unable to take advantage of historically low mortgage rates are homeowners whose homes have lost value, and they now owe more on their mortgage than their property is worth. They want to refinance but can’t because they lack equity. While this may seem like a terrible predicament to be in, it’s really not so bad.

The key here is to be patient. Home values will rise eventually. And the longer these folks stay in their homes and pay down their mortgages, the more equity they’ll have. While it’s true that most of these homeowners can’t refinance today, as long as they make smart financial decisions, pay down their mortgage, and have patience, they may find a great mortgage rate and lower payment coming to them soon.

The first step is to talk with someone who can help. The second step is to make some good financial decisions. The third step for all consumers is to put money back in their pocket – not in their mortgage payment.

Talk to us if you’re in one of these three categories. Perhaps there is help available that you’re just not aware of.