Refinancing becomes more challenging

Couple celebrating in front of their new house
cookienanster / Twenty20
Refinancing could decrease your monthly payment and save you thousands over the lifetime of your mortgage.

Homeowners whose mortgages have interest rates at 4.25% or higher have been salivating over today's rates that are much lower — at levels never seen before.

The Mortgage Bankers Association says rates on 30-year fixed-rate mortgages have been averaging 3.45%, a record low for the trade group's weekly survey.

Mortgage giant Freddie Mac says 30-year mortgage rates are down even deeper: at an average 3.33%, which is not far from the Freddie Mac survey's all-time low of 3.29% reached in early March.

But in recent weeks, as the economic outlook has worsened, major lenders have made today's low mortgage rates harder for some homeowners to snare.

JPMorgan Chase is limiting new loans to borrowers who make down payments of at least 20% and have FICO credit scores of at least 700.

And United Wholesale Mortgage, another of the country's largest mortgage lenders, is re-checking to make sure borrowers have jobs on loan closing days, according to HousingWire.

"These measures will likely be unpopular, but they speak to the uncertainty of the times and the difficulty for these organizations to gauge borrowers’ ability to repay at a time when millions of people are suddenly out of work," says Matthew Speakman, an economist with Zillow.

Homeowners overcome the obstacles and keep refinancing

Father with Son and Daughter
shutterbugshirley / Twenty20
Homeowners are seeking refinancing to save on their mortgages.

Despite the higher standards imposed by some lenders, refinancing has held fairly steady.

Overall mortgage applications slipped 0.3% during the week ending April 17, the Mortgage Bankers Association (MBA) reported on Wednesday.

Refinancing requests edged down 1%, the trade group said, but demand for refi loans was up 225% — more than triple — compared to the rate of a year ago.

"The refinance index dropped slightly last week but remained close to its 2013 highs," notes Joel Kan, the MBA's associate vice president of forecasting.

"Borrowers continue to take advantage of low rates to gain some monthly savings, which is a welcome reprieve during these tough economic times," he says.

Homeowners who refinance loans with rates of about 4.25% or higher are cutting their monthly payments by $60 for every $100,000 they borrow, recent research from LendingTree found.

About 13 million U.S. homeowners are sitting on mortgages worth refinancing, according to an estimate from the data firm Black Knight. Are you in that group? Do some mortgage comparison-shopping and see how you could chop your rate — and your monthly housing costs.

Take a look at today's best mortgage rates where you are:

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."