Planning to Refinance? Looking at a Home Mortgage? Maybe You Should Get a Move On
Many people waiting for mortgage rates to drop right now. Indeed, many people think that they should be heading lower soon, what with banks starting — albeit cautiously — to lend to each other again. Additionally, Ben Bernanke is supporting efforts for a second economic stimulus package and hinting that Fed rates may be cut again. While the Fed rates do not have a lot of impact on a first home mortgage, a second home mortgage is definitely affected by Fed rates. So, whether people are looking to refinance or to get a first home mortgage, there is some tendency to wait for either:
- Mortgage rates to head lower.
- The market to hit bottom.
At this point, waiting could lead to problems. Here is what The Mortgage Reports says about how things are likely to get in the coming months:
Starting 60 days from now, qualifying for a conforming mortgage will require more home equity than at any time since 2003.
Now, there are a lot of people sitting around right now, waiting for mortgage rates to fall before buying or refinancing their home.
I’d offer a more prudent idea: Just get on with it already.
The reference here is to the latest round of mortgage lending guidelines issued by Fannie Mae. These new guidelines are going to limit the amount of money you can get on a refinance: Primary residence “cash out” to 85% loan-to-value and 75% loan-to-value for secondary residences. And you better have a 25% equity position if you want to refinance an investment property.
On top of that, down payment requirements are getting tighter. The down payment thing has been happening across the board with many mortgage lenders. 5% and 10% are becoming the norm, and some mortgage lenders are requiring 20%. While Fannie Mae is the only lender tightening these refinance guidelines officially, it probably won’t be long until other mortgage lenders follow suit. Fannie has long been a trend setter in the mortgage world, and this is probably not such a different situation.
This means that, if you are looking into a refinance — or even a first home mortgage — now is probably the time to do what you can. Because it’s about to get tougher.
Tags: refinance, home mortgage, home mortgage loan, Ben Bernanke,
second home mortgage, first home mortgage, mortgage lenders
