Loans at lower rates, harder to get

Dayton Daily News - May 19, 2012

Chelsey Levingston

Local homeowners able to refinance their mortgages at today’s record low interest rates could save hundreds of dollars on monthly payments, putting more money in their pockets to spend on other things. Fixed-interest-rate mortgages for 30-year loans in the U.S. had an average 3.79 percent interest rate as of Thursday, compared to an average interest rate of 4.61 at the same time a year ago, according to Freddie Mac’s Primary Mortgage Market Survey.

The fixed rate on a 15-year mortgage as of Thursday was 3.04 percent.

The Mortgage Bankers Association said for the week ending May 11, its index of mortgage applications for refinancing surged 13 percent.

Refinancing increased that week to nearly 75 percent of all mortgage applications, according to the association’s survey of mortgage bankers, commercial banks and thrifts.

“People are hearing we are in historical low rates and again, with the economy where it is, it’s really drawing them in to save money where they can,” said Paula Hall, assistant vice president and sales manager, U.S. Bank Home Mortgage.

“I’ve probably done more 15-year mortgages in the last year than I’ve done my whole career.”

Ruth Menz of Sidney, a housing counselor, is refinancing her home loan for the second time.

When she built her house seven years ago, the interest rate was close to 6 percent, a good rate at the time, she thought.

The rate on her new loan will be about 3.75 percent.

“I’m doing it because I’m lowering my interest rate by 1 percent and I’m taking seven years off my mortgage,” she said.

“It’s nice, it’s saving us money, but then I lost all this money too because the values fell.”

More refinancing will give some boost to the economy, in part by freeing up discretionary income, said Sondra Stumpf, grant operations manager, and Stephanie Casey-Pierce, housing counseling support manager, of Ohio Housing Finance Agency.

The problem is, a limited number of homeowners can qualify, experts said. A refinance is essentially a new loan. And homeowners looking to refinance can’t be behind on payments.

Menz also said it’s not always worth it to refinance, depending on how much in interest is saved and closing costs.

“You have to meet the same challenges to refinance as you do to get a new home loan. In today’s market that means having very acceptable credit,” said Don Gardner, a housing and foreclosure prevention counselor for Neighborhood Housing Services in Butler County.

Another roadblock is that underwater mortgages usually don’t qualify for refinancing. An underwater mortgage is where the loan balance exceeds the value of the house. An estimated more than 520,000 Ohio mortgages were underwater in 2011, according to Policy Matters Ohio, a liberal think tank.

A refinance is not the same as a loan modification. Loan modifications are for those homeowners at risk of default on their loan because they missed payments. They can apply for a modification to negotiate the terms of their loan to make it more affordable, often extending the length of their loan, Stumpf and Casey-Pierce said.

Loans at lower rates, harder to get

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