Todays mortgage rates are so low that refinancing might make sense for you now, even if it did not a year ago. But what are the other factors that are behind these low rates and what things should you consider before making the decision to refinance mortgage? Well, you can get your questions answered by visiting the SoFi website.
“Our latest Mortgage Repayment Report reveals that the majority of borrowers have higher credit scores or higher incomes than their loans would suggest. We found that only 8.8 percent of borrowers have at least one credit score above 600 below the average for FHA loans which means that most are less than capable of repaying a high-rate loan without losing their homes. One in every five borrowers has a score between 550 and 600. In fact, there are roughly 2.8 million low-income borrowers in our market who could potentially qualify for a refinance,” says Trulia senior research analyst, Matt Cain, who authored the report.
“Another large group of borrowers have either credit scores below 640 and/or median incomes below the FHA threshold for borrower affordability which could also preclude a refinance,” says Cain. “The majority of FHA-insured borrowers who would qualify for a refinance have low income levels or a combined income that is below the FHA’s threshold for borrower affordability, leading us to conclude that a large majority of low income borrowers face a lack of affordable, adjustable rate mortgages as they move through the mortgage market.”
A recent study from Fannie Mae and Freddie Mac found that “in 2013, low-income borrowers and those with significant assets who were struggling to pay their mortgage were more than twice as likely to have defaulted on their mortgage as mortgagees with relatively little or no mortgage debt.”
Rates have remained steady
Since 2009, the average amount a borrower has paid for a 30-year, fixed-rate mortgage, including closing costs and mortgage insurance premium, has remained the same. In 2011, it was $206,400, according to the Center for Responsible Lending. In 2015, it was $207,900.
A 30-year fixed-rate mortgage is different from a 30-year fixed-rate mortgage with a balloon payment. A 30-year fixed-rate mortgage with a balloon payment is one in which payments are not adjusted annually, but can increase annually as the amount of debt used in the calculation increases. “The higher the amount of debt, the higher the percentage of mortgage debt that is being counted,” said Jack Grainer, who conducts surveys for the Center for Responsible Lending. “So people with higher credit scores and more income could have more difficulty with paying back their mortgage.” Borrowers with lower credit scores and lower income would likely benefit more.
A 60-year fixed mortgage with a 10 percent down payment is more favorable to borrowers with low credit scores and low incomes, and less favorable to borrowers with high credit scores and high incomes, Grainer said.
A 15-year fixed mortgage is a 30-year fixed-rate mortgage with a 3 percent down payment, but the payments are adjusted each year, as the amount of debt used in the calculation increases.