Mortgage Refinance Guide

Mortgage foreclosures are on the rise and lenders are tightening up their standards for approving loans. If you’re in the market to refinance your mortgage there are several problems you’ll want to avoid. You may have seen in the news that lenders are taking a beating because of the collapse of the bad credit or “sub-prime” industry. This has affected not only homeowners with poor credit ratings but those refinancing their loans with good credit.

Mortgage lenders are tightening their standers and requiring homeowners to provide more documentation and accept less flexible terms on their loans. If you are considering 100% percent financing you could find the proposition difficult if you have anything less than stellar credit. Also, if you considering low or no-doc mortgage loans it could be difficult finding a lender to approve your loan; stagnant property values are increasing the risks significantly for lenders with these types of loans.

Other types of 100% financing have also been affected by market conditions. If you are considering an 80/20 or “piggyback” loan to refinance your home Standard & Poor is reporting that these loans are now over 40% more likely to end in foreclosure than if you refinance with a conventional loan. It will be more difficult in the future to refinance with loan-to-value ratios greater than 80%.

A less than favorable economic outlook in the United States means that it will become more difficult for homeowners seeking credit in the future. Mortgage lenders are nursing their wounds and avoiding homeowners they deem too risky for lending. This doesn’t mean homeowners with good credit and a steady income will have problems refinancing; there are incredibly good deals to be found for borrowers that meet this criteria. Mortgage rates are expected to remain stable over the coming years as the industry recovers. Declining home values are allowing buyers to take advantage of the situation with some incredible bargains.