Mortgage Rates At All-Time Lows

Mortgage interest rates continue to see new record lows, hitting rates not seen since the 1950s. But brokers say few of the many homeowners rushing to take advantage and refinance their loans will be able to qualify.

The high levels of unemployment and depressed property values in many parts of the country have made it tougher for many borrowers, and lenders are demanding better credit histories and proof of income before they’ll refinance a loan. Only about half of those looking to refinance may actually qualify for a loan — far lower than before the housing market bust, mortgage brokers say.

Still, for many borrowers who don’t face those problems, the rush to refinance is on.

Applications for refinancing are up nationwide. According to Freddit Mac, four out of five conventional loan applications and more than half of FHA and VA loan applications over the past month were for refinancing.

To see if refinancing makes sense, borrowers should divide the fees they pay to refinance their loans by the monthly amount they’ll save. That will tell them how many months they would have to live in the home to recoup the expense of refinancing.

Tougher standards are affecting even some folks with sterling credit seeking new mortgages. Lenders want borrowers to have a 740 credit score or higher to qualify for the lowest-rate mortgages loans. Two years ago, a 680 score would suffice.

Lenders also now require full documentation of a borrower’s income, unlike during the housing boom when “no documentation” loans were often called “liar loans.” And some are requiring borrowers to re-verify their income in the time between the application and final approval.

Also of Interest Why Rent When Home Prices Are So Low?

Many economists expect mortgage rates to remain low heading into 2011, but many warn that outlook could change if inflation, which is pretty much absent today, comes roaring back.