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Friday, December 26, 2008

Low Mortgage Rates, Few Qualify

by Calculated Risk on 12/26/2008 11:33:00 AM

From the Miami Herald: Refinance rates low; few qualify

Recent drops in interest rates have homeowners rushing to call local banks and mortgage lenders about refinancing. Loan applications are pouring in.

Yet, South Florida homeowners are mostly getting a big fat ''No!'' from the bank when they ask to refinance. The chief reason: Falling home values mean they owe more than their homes are worth.
In South Florida, four in 10 homeowners who bought or refinanced over the past five years owe more on their home than it is worth, according to sales and mortgage data analyzed by ... Many of them chose adjustable-rate loans and other expensive mortgages because that was the only way they could afford the payments.
''This is only putting people who are in a good position in a better position,'' [Justin Miller, a broker with Resource Mortgage Group in Plantation] said.
Before LaPenta begins processing an application, he said he makes sure customers are aware of the essential criteria needed to refinance: 20 percent equity in the property, a homestead exemption, a credit score of 700 or higher, a mortgage debt-to-income ratio of no more than 45 percent and the ability to fully document income and assets.
This is a key point - these lower rates don't help underwater homeowners. Also, I think the 45% debt-to-gross income ratio is a little higher than most lenders will allow now.