Rates Fall Below 5%, But Mortgage Refinance Challenging

Mortgage rates are hitting record breaking lows, flooding down-sized lenders with new mortgage applications. Unfortunately, many of these eager homeowners may find attractive mortgage rates and lower payments elusive.

Mortgage lenders are hoping this refinance boom brings similar results to 2001, a surge that triggered a recession recovery. However, this flurry of refinance activity comes with a dramatically different economic landscape. Housing values have been dramatically effected across the nation and credit standards are historically restrictive.

For months, even borrowers with flawless credit are faced with challenges to get great mortgage rates. Lenders are expecting a good job, documented income security, and home equity. Unfortunately, most homeowners are finding their home equity ravaged by a housing market devoid of healthy new home sales.

Many homeowners, attempting to refinance, are being frustrated by low home appraisals. The national housing market has long been stalled, leaving the only available comparable home sales as deeply discounted foreclosure and bank sales. In many markets this means double digit declines in home values.

Falling home prices are forcing refinancing borrowers to come up with additional cash or pay for private mortgage insurance (PMI) to secure a great mortgage rate. This is leaving a lot of responsible homeowners out in the cold for historically low rates.

Home equity is not the only challenge to refinancing. Lenders have dramatically downsized operations or gone out of business. This is leaving inquiring homeowners waiting in line for service. Mortgage brokers and banks are struggling to answer the new demand. However, with only about 25 percent of applicants qualified they are hesitant to increase staff.

This means your path to one of these great rates will be a slow patient march. However, locking in a 30-year mortgage below 5 percent is peace of mind many are willing to endure a little inconvenience to pursue.