Mortgage rates continue to fall — but qualifying is no picnic

I can tell you first hand that MOST buyers are extremely frustrated with qualifying for a loan these days. Most of my buyers, hard working, responsible adults…who have saved for years to buy something are now being hit with the reality that they simply can’t qualify under today’s rigid guidelines. Great LA Times article below talks about that today:

The Gershwin standard is “Nice Work If You Can Get It.” The refrain in today’s housing market would be: nice loans — IF you can get them.

Fixed mortgage rates have dropped even further, making this the sixth straight week of record lows in Freddie Mac’s survey of what lenders are offering to highly qualified borrowers.

Freddie Mac said Thursday that people with solid credit, 20% down payments or equity in their homes, and sufficient income to handle the loan payments were finding 30-year fixed mortgages at an average 4.54%, down from 4.56% a week earlier and 5.25% a year ago.

The offering rate for a 15-year fixed mortgage averaged an even 4%, down from 4.03% last week and 4.69% at this time last year.

The borrowers would have paid 0.7% of the loan amounts up front in fees and points to the lender, Freddie Mac said.

The interest rates are the lowest since the giant mortgage company began tracking the 30-year loan in 1971 and the 15-year mortgage in 1991. Solid borrowers who shop around often wind up with lower rates than those quoted in the lender survey.

For example, Laguna Niguel loan broker Jeff Lazerson said Thursday morning that he was able to get borrowers 30-year loans at 4.125% with 1 point and 15-year mortgages at 3.75% with zero points.

But lenders aren’t kidding about that solid-borrower standard these days. Freddie Mac and Fannie Mae — both wards of Uncle Sam in the aftermath of the mortgage meltdown — purchase virtually all fixed-rate loans. And they have tightened the standards for what they will accept, causing lenders to ratchet up their requirements as well.

Tori Richard, who earns a good living as a freelance reporter, complained in an e-mail to me of being unable to refinance her mortgage with her current lender, Provident Funding. Provident was offering the best rate she could find — about 4.2% for a 30-year with less than a point upfront — but apparently not to her.

Richards said she wanted to make some home repairs by taking cash out of the deal — a fact that, like being self-employed, can make it harder to get a loan these days.

“I’ve had my loan there more than 10 years,” Richards said. Even though she can show several years of good earnings, “They don’t like the fact that I’m a self employed freelancer,” she added.

“Nevermind that it makes no sense that my new loan will have a lower monthly payment, making it EASIER for me to pay, not harder.”

Provident declined to comment.

SOURCE www.latimes.com by E. Scott Reckard 8/11/10

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