Best Refinance Rates We’ve Seen - If You Can Qualify

It’s almost like a joke, if there weren’t so many homes on the line. We are currently seeing the best refinance rates we’ve seen in a long time. They are heading south of 5.5% right now, which is a great rate if you can get it. But therein lies the rub. Many people cannot qualify for refinancing right now due to the housing market collapse (and declining property values).

People have lost equity in their homes, and many people now owe more than their homes are worth. So while we are seeing the best refinance rates right now, only a minority of Americans can actually use them.

On top of that, the basic qualification criteria to get a refinance loan (such as credit scores and debt-to-income ratios) have gone up as well. So even if you’re not necessarily upside down in your mortgage, you still need an excellent credit score to qualify for the best rates on a refinance loan. This is something that many homeowners don’t realize. They see these great rates mentioned on TV and in the newspaper, and they see them offered on the websites and marketing materials of lending companies.

But if you look close, you’ll notice that there’s always and asterisk following the best refinance rates advertised by lenders. Follow that asterisk into the fine-print disclaimer section, and you’ll see that the best rates are only offered to ”well qualified borrowers.” And the lender can define “well qualified” however they wish.  

I don’t say all of this to discourage you, or to contribute to the doom and gloom that’s already omnipresent on the Internet. I just want you to have the proper expectations. If you want to qualify for the best refinance rates you’ve been hearing about lately, you need the following…

• A sufficient amount of equity in your home, like 20% or more
• A really good credit score, probably upward of 720
• A favorable debt-to-income ratio

If you’re doing well in these departments, then I say go for it! You’ve got nothing to lose, and a lot to gain. The first step is to apply for a mortgage refinancing loan through a reputable lender. In fact, I recommend that you get quotes from several lenders, so you have a better chance of getting the best refinance rate on the offer. We have always recommended LendingTree for this very reason — you can get offers from up to four lenders at once. You can get started on the Refinance Quotes section of our main website, or by clicking the LendingTree link at the top of this blog.

Once you get some offers from lenders, you’ll be able to run the numbers to see if refinancing makes sense for you. Remember, a refi isn’t a good idea in every situation. Sometimes it works out for the homeowners — sometimes it doesn’t. But when you know what kind of interest rate you can get, and what the closing costs will be, you can run the numbers to see if it works out in your favor. And if you do in fact qualify for the best refinance rates on your new mortgage, there’s a good chance the loan will work out in your favor (i.e., the savings will be greater than the costs).

So yes, it’s a tough time to get a refi loan right now. Many homeowners are upside down in their mortgage loans and therefore lack the equity needed to qualify. But for those who do qualify (based on the information I’ve presented above), it’s a really good time to refinance right now, because you can lock down the best rates we will probably see for a while. If this describes you, then get started right here.

Filed under: Refinance Questions