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Mortgage Refinancing Problems

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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.

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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.

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{ 1 comment… read it below or add one }

pat kell March 18, 2012 at 9:37 am

I was wondering if you could help me. I have a home going into foreclosure soon. it is not my primary residence – was renting it out and we were making up the difference between mortgage and rent. Renter lost job couldn’t pay. husband lost job history repeats. Still couldn’t find anyone to rent it etc. Anyway husband got new job salary not so great. Is there any lender out there that could possibly help us refinance my primary residence? My credit is still good as of last week it was 736. I am current and never late on this mortgage and all of my bills. Checked around and got laughed at. Saw and ad on line this morning that said the state of Ill. where I reside will no longer have a credit check. Hard to believe. Is there anywhere else I can check? Any advice would be appreciated. Thank You

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