Low mortgage rates continue yet refinancing applications dip
The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2011 showed that mortgage applications for a home refinance dropped slightly by 1.7 percent from the previous week in spite of continued low rates.
According to HSH.com, the average rate for a 30-year fixed-rate home loan declined to 4.50 percent during the week ending August 19, a new record low. The average rate for a 15-year fixed-rate mortgage dropped to 3.73 percent and 5/1 adjustable rate mortgages (ARMs) dipped to 3.23 percent. Homeowners without a lot of equity can often refinance into an FHA loan even if their current mortgage is not an FHA loan. FHA-backed 30-year fixed-rate mortgages dipped to 4.16 percent this week.
Mortgage refinance qualifications
One reason mortgage refinancing applications have slowed a little is that homeowners and homebuyers continue to face the challenge of qualifying for a new home loan. According to HSH, the Federal Reserve’s latest survey of Senior Loan Officers found that underwriting standards for residential first mortgages were little changed in the second quarter of 2011. Ten to fifteen percent of banks polled in the survey reported slightly easier standards for qualifying for a mortgage, but the rest say applicants still face tight guidelines for approvals.
FHA loans for refinancing
While many consumers assume FHA loans are meant for first-time homebuyers, these loans are available to all buyers as long as the amount they need to borrow is under the limits established by the FHA. Those limits are set to change October 1, 2011. Loan limits vary by area from $417,000 to $625,500, although they are lower in some low-cost areas and higher in some high-cost areas.
If you have less than five percent equity in your home and/or a credit score under 720, you may want to discuss the option of refinancing into an FHA loan with your lender. While you will have to pay mortgage insurance on the loan, the reduced interest rate could offset the insurance premium enough to lower your monthly payments.
