Homeowners who are facing the threat of foreclosure may have an opportunity to refinance their properties following the dropped in interest rates for home mortgages.
The 30-year fixed-rate mortgage loans averaged 5.9 percent, a dropped from 6.04 of the previous week. This marked a decline of below 6 percent nationwide since last October.
The rate decrease came about after the U.S. Federal Reserve announced its plan to buy at least $600 billion owed or guaranteed debts by the government-sponsored enterprises, Federal National Mortgage Association or Fannie Mae, Federal Home Loan Mortgage Corp. of Freddie Mac and Government National Mortgage Association or Ginnie Mae.
The Federal Reserve aimed to reduce home mortgage rates by lowering borrowing costs of these three government-backed mortgage issuers. It is expected that borrowers who want to avoid foreclosure would take advantage of reduced interest rates. However, most homeowners who decide to refinance will have a difficult time qualifying because they either have mortgage arrears or low credit scores.
Mortgage broker Jeff Lazerson said that borrowers who want to avoid foreclosure want to exit from adjustable-rate mortgages which are scheduled to readjust to higher rates in 2009. He adds that for owners of distressed properties to qualify for low interest rates, they must have a good credit score.
Homeowners who can provide a 25 percent down payment and have credit score of equal to or more than 740 can avail of a 30-year fixed-rate loan for a maximum of $417,000 at 5.25 percent interest rate. Those who could provide a 20 percent down payment and have a 720 credit score may avail of a 5.375 percent interest rate on a 30-year fixed-rate loan.
California Credit Union League economist Terrin Griffiths pointed out that the housing market’s condition would continue to be bleak and foreclosures would still be on the rise because homeowners still need money for down payment and some borrowers are hesitant on buying in an unstable market.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.
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