Refinancing now sounds appealing, but for lots of people, it isn’t all that easy.

Applications for refinances tripled earlier this month after the Federal Reserve promised to buy up $600 billion of mortgage debt. And rates for 30-year fixed mortgages are falling below 5 percent – the lowest in 50 years – but many home owners will have trouble doing the deal.

Having at least 20 percent equity in a home is important. A credit score of at least 720 and a debt ratio that is less than 43 percent are both essential.

Jumbo mortgages are still expensive. A 5/1 adjustable-rate with an initial interest rate for five years and an annual reset is averaging 6.6 percent. Traditional 30-year fixed are at 7.49 percent. Home owners in this situation may have to just ride it out.

Source: Business Week, Lauren Young (12/22/08)

Mortgage Rates Plunge to Record Lows
In response to the Federal Reserve’s cut in the federal funds rate to near zero, Freddie Mac reports that the 30-year fixed mortgage rate fell to 5.17 percent during the week ended Dec. 18–down from 5.47 percent last week and the lowest since the survey’s inception in 1971.

Interest on 15-year fixed loans slipped to 4.92 percent from 5.20 percent.

Meanwhile, the five-year hybrid adjustable mortgage rate dropped to 5.6 percent from 5.82 percent; and the one-year ARM dipped to 4.94 percent from 5.09 percent.

A year ago, the 30-year fixed rate stood at 6.14 percent, the 15-year fixed rate at 5.79 percent, the five-year hybrid ARM at 5.9 percent, and the one-year ARM at 5.51 percent.
Source: The Wall Street Journal, Steve Kerch (12/19/08)