Why Might Getting Mortgage Refinance be Harder with Low Rates?
Thursday, September 9th, 2010Many homeowners might have been holding for these rates for a while. Many applicants want to take advantage of these rates and lock them as long as they can. In uncertain economic environment, certainty of fixed monthly mortgage payments is very comforting.
As a result of low rates, increased number of applicants should be welcomed by lenders. However, it might be too good for many lenders. There are signs that some lenders starting to get picky. With more than expected applicants, they can afford to be. Mortgage lending was getting stricter for a while and it was resulting in reduced applications. Since, it seems that applications has picked up, lending could get stricter. This could be temporary due to high number of applicants. However, it is unlikely that refinance home mortgage loan lending terms will be relaxed in the near future.
Many mortgage lenders have been laying off staff in thousands. hence, they might find it difficult to cope with high number of applicants unexpectedly. They would be reluctant to start hiring again as the economic uncertainty still prevents them doing so. Some mortgage lenders might see this as a chance to strengthen their loan books with highly qualified borrowers. Therefore, mortgage products might require high credit scores in an attempt to sign highly qualified borrowers.
Probably the first signs would be that they would spend less time on incomplete applications. At these times, lenders might be reluctant to seek further information and return incomplete applications. Refinance mortgage applicants are advised to be well prepared. They should fill their applications properly and include all the relevant documentations. It is a very good time to be sorting out home mortgage payments; they should not miss on that because of silly mistakes. In addition, returned applications will waste time and have credit score implications. Nobody knows how long these rates will last. There is certainly no need for the lenders to compete for business when they have many applicants. This is a natural selection process. When there is too many of something, the stronger will be chosen. It is not because the lenders are making less money due to low mortgage refinance rates. They still can keep their margins, as they pay less for the money they lend.
The message could be that homeowners should implement refinancing plans when they can. Although even lower rates would be lovely, it might get harder to get mortgage. Already many homeowners could not take these low rates for many reasons. Low home valuations is one of them and high down payment requirements is other.
Stricter home loan requirements might come in many forms. They would add up to be a serious problem. For example, most home valuations are instructed by lenders. They could easily select more conservative surveyors to carry out the valuation. This would give them extra cushion of safety against house price drop. In addition, surveyors might choose to be cautions themselves worried about possible liabilities.
Overall impact would hinder more and more applicants. That is why it would be wise to look into refinance options now.
