By Elliott Topkins, Esquire
10/13/11
It is not news to most people that mortgage interest rates are at levels not seen in decades. Many fixed rate programs have sub 4 percent fixed interest rates for very qualified borrowers. If you are willing to take greater risk, or you do not plan on staying in your current home for more than three or four years, adjustable rate programs in the three percent range are available. Many lenders have “no-closing” cost loans which make the process strictly a numbers game. Are you paying less with the new program than with your current mortgage situation? If you can do this, you should take the deal.

So, now, I need to say “not so fast.” There are problems with many current refinancings that did not exist in the past. Lenders are much more picky than they used to be. The qualification rules are changing, and higher credit scores are generally a requirement for today’s refinancing market. The other obstacle is the value of your home. While New England has fared better than many other areas in this global real estate deflation, there are still many homes which are not worth what you paid for them. If that is the case, the only way you will be able to refinance is to pay down the principal amount of your mortgage to a level which permits a new mortgage. Most people are not able to do this, especially in these troubled times.

These are some pieces of information which I have picked up in terms of refinancing:

Find a reliable mortgage loan officer and tell that person the whole truth. Even if you exaggerate just a little, you may not qualify for the program you have in mind. On the other hand, if you are candid, an experienced loan officer may be able to develop a scenario for you that permits you to take advantage of today’s low rates.

Be willing to spend some money finding out the value of your home before you enter the refinancing arena. There are appraisers out there who will perform a “desk top” appraisal for less than $100. Most of their results are accurate, and you will know before you start paying fees whether the refinancing can “fly.”

If your credit score is lower than required, devote your attention to getting your score higher. This may mean paying off, and cancelling, some of your credit cards. A good credit counselor can point you in the direction you should be taking. This is tricky stuff, but your credit score is becoming more and more important, and you need to work on improving it, if you want to be in an advantageous position.

There is “red-tape” involved in all mortgage financing these days. The days of “no-peak” are over. On the other hand, there is no guarantee that rates will continue to be as low as they are today, and it is worth your while to expend some energy to take advantage of what may be the lowest rates of our lifetimes.

(Mr. Topkins is an attorney with Topkins & Bevans, Braintree Executive Park, 150 Grossman Dr., Braintree, MA 02184. His blog can be found at http://realtorsresourceblog.com. His telephone number is 617/596-3184 and his e-mail address in etopkins@topbev.com.)