Mortgages: Rates Are Down, But Increasingly Hard to Get

With the government throwing a lifeline to Freddie and Fannie last week, 30 year mortgage rates experienced a good drop.  The average rate hovered near 6.5% just before the rescue and after the bailout, dropped below 6.0% for the first time in  5 months.

 
Chart:  MSNBC

So for folks playing the waiting game, the time to refi or buy may be now.  However, don’t get too excited.  Rates may be down, but loans in general are harder to get.

As noted in this recent article on CNNMoney.com, getting a loan these days is much tougher than it has been in the past. And with the current chaos and turmoil that is happening with financial firms and banks, I’m sure it hasn’t gotten any easier in the past few days. 

As the article noted, “…only buyers with a credit score of 740 of above – and a 20% down payment – can qualify for such a low rate.”  Not only are banks raising the minimum credit scores to which they are willing to lend out money, some banks are requiring even slightly more than 20% down, increasing it to 25%.  Now that they have been burned, they are also looking more closely at the neighborhood home and market trends of the house for sale.  Some banks won’t consider financing homes in particularly areas, due to their perception that values are going to continue to slide or may request more initial equity (i.e. larger down payment).

The yield on the 10 year treasury bond, which the 30 year mortgage rates often track. dropped significantly with all of the activity on Monday with the banking industry.  This may translate to even lower rates, but I can’t see given the turmoil with all the banks, that they have a ton of money to lend out.  So yes, rates are lower, but the key it seems now is being able to pin down that mortgage committment.

Have you refi or gotten a mortgage lately?  What’s been your experience?