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Bruce McCoy
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Mortgage rates are hovering near a 45-year low. However, some homeowners don’t think that they can qualify to refinance their mortgage. This idea springs from half-known underwriting rules, mis-information from friends, or even new loan officers that haven’t had enough experience! For many, qualification is actually easier!
Several years ago, the two main purchasers of mortgages on the secondary market, Fannie Mae and Freddie Mac, started underwriting files via computer models. In other words, Fannie & Freddie looked at all of the loans that they had purchased over the years and analyzed which borrowers had defaulted or had payment problems, and which borrowers were able to make their payments on time. They looked at the original loan application, auditing it for accuracy of credit, income and even property appraisals. Then they compared this information with the borrowers’ existing circumstances when they could. This analysis let them develop computer models that could predict the likelihood of a prospective borrower being able to make their payments. Now new loan scenarios could be input and compared to these models.
One of the outcomes from this analysis seems obvious by anyone making even a casual observation: that if a borrower were refinancing the existing mortgage and lowering the house payments and had no problems making the older, higher payments, then the borrower shouldn’t have any problem with a new lower payment. The debt to income ratio wasn’t as big of a factor as they originally thought. Seems kinda obvious to me!
All of that led to this: If your credit is good, you are refinancing for a better rate or term (just paying off the existing mortgage), and are lowering the payments, then you probably will be approved no matter what the debt to income ratio is.
So, even if your job was off-shored a couple of years ago and you have had to subsist with less income, you may still be able to refinance into today’s low rates. Give me a call and I’ll be happy to go over your circumstances with you.
Fixed rate mortgages for conforming loans (under $333,700) as of 3/22/04 (p.m.) are:
30 year fixed: 5.375% (APR 5.45%) payments are $1,868.62/mo.
15 year fixed: 4.625% (APR 4.75%) payments are $2,574.15/mo.