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Yes, it’s official. Mortgage rates ARE at historic lows, and everyone is on the refinance bandwagon. Except those folks buying homes, who are on the best-buyer’s-market-in-decades bandwagon. In fact, the bandwagon is really one big low-mortgage-rate bandwagon and it’s a great ride for many Americans right now.

And rates are looking good for the near future. The LIBOR index just lowered this week, which means key interest rates will remain low. That’s good news for consumers, good news for the economy – good news for just about everyone.

Almost everyone.

Folks Who Can’t Qualify for Historically Low Mortgage Rates

The truth is not everyone can take advantage of either the home buying or refinancing market today. There are people who would love to lower their payment or buy a home at record low prices, but can’t. Why? The answer isn’t always easy, but for the most part these folks fall into three buckets:

1) Those who have bad credit. Bad credit is no longer something that lenders can look the other way about. In fact, it’s probably one of the main reasons that people can’t get a mortgage in today’s market. Credit is tight, and mortgages are harder to qualify for than any time in recent history.

But the good news is that it’s the easiest problem to fix if you understand credit, know what steps to take to improve your credit, and have the patience and discipline to actually do what it takes to improve your credit. Doing this is almost never easy. It requires cutting back, saving, spending less, paying off debt and making sacrifices. But the rewards can be dramatic and can come quickly. Just raising a credit score 20 points may be the difference between qualify for a mortgage and not qualifying.

It’s a tough road, but improving credit is possible if one is willing to adopt an any-means- necessary approach.

2) Those who need a jumbo loan. Many think of “jumbo loans” – a loan over the conforming loan limit of $417,000 – as something only rich and famous folks get or think about. Not so. In fact, in many popular urban areas, such as New York City, Los Angeles and San Francisco, a loan at the upper edge of the conventional limit barely has the purchasing power of a small starter home.

This wouldn’t be a problem if jumbo loans came at the same rate as conventional loans, but that’s not the case. Most often the interest rate for jumbo loans runs at least one percentage point higher than smaller conventional loans. This means that the historically low rates that people are enjoying around the country haven’t made it to the most expensive homes. Ironically, these are the homeowners who would benefit most from lower rates.

It may seem unfair, but the powers-that-be in the housing market (not in the control of mortgage companies, mind you) consider jumbo loans more risky than conventional loans, and therefore they’re more expensive. Congress eased the pain a bit by raising the conventional loan limit to $625,000 in several high-rent areas, but that has little affect in most parts of the country.

There really isn’t much homeowners in this niche can do, other than keep their fingers crossed and hope that one day jumbo loans drop down to match the great deals that those with smaller mortgages are enjoying today.

3) Those who owe more than their house is worth. The third group unable to take advantage of historically low mortgage rates are homeowners whose homes have lost value, and they now owe more on their mortgage than their property is worth. They want to refinance but can’t because they lack equity. While this may seem like a terrible predicament to be in, it’s really not so bad.

The key here is to be patient. Home values will rise eventually. And the longer these folks stay in their homes and pay down their mortgages, the more equity they’ll have. While it’s true that most of these homeowners can’t refinance today, as long as they make smart financial decisions, pay down their mortgage, and have patience, they may find a great mortgage rate and lower payment coming to them soon.

An FHA loan, for instance, only requires 2.25% for refinancing. If a homeowner is in a high-rate mortgage and could save hundreds of dollars a month with a lower rate, it’s smart for them to pay as much as possible toward their current mortgage to bring their equity to a qualifying level. In many cases, even a few thousand dollars toward the current mortgage could be recouped via lower payments in a matter of months. Anyone considering this should speak to a mortgage professional. They’ll work out the details and find out if this makes sense now, or if they should wait and continue paying their current mortgage.

Find Out if You Qualify for Today’s Low Mortgage Rates

Mortgage rates are now at attractive levels to millions of Americans. Although there are those who aren’t able to take advantage of this unique mortgage market, with some good planning and financial advice, the doors may soon open to a lower mortgage rate and payment. The first step is to talk with someone who can help. The second step is to make some good financial decisions. The third step for consumers is to put money back in their pocket – not in their mortgage payment.

Related Info

• Learn more about refinancing or learn about buying a home.
• Find out more about jumbo loans or FHA loans.
• Learn about credit and how it affects your mortgage rates.
• Get today’s mortgage rates or get great information from our mortgage calculators.

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