Once again, this sounds AWESOME in theory, but it is just not happening.  For those of you that want to refinance, you are probably not aware of the fact that the value of your home has greatly decreased.  If there have been any foreclosures or short sales in your neighborhood, you can expect the value of your home to be as much as 20% less than you expect.  It is hard to swallow this truth, but it will be much easier if you accept it now rather than getting upset after you see your appraisal value in the refinance process.

Unfortunately there is not much you can do unless you have some money laying around.  The best option for you is put a huge chunk of change into your home so your loan-to-value ratio is closer to 70% rather than in the triple digits.  If you hope to refinance with a loan-to-value ratio over 95% you can expect to get a rate MUCH higher than the advertised rates of under 5%.  It is discouraging, but it is the truth.  The only home owners who are going to benefit from the Obama Refinance Plan are those who have been in their homes for many years and have paid off a great deal of their mortgage.

If you are a young home owner, less than five years, it is not likely that your refinance rate will save you that much money.  There is no harm in trying, but it might end up being a waste of time.  If you do want to refinance, make sure to apply to more than one mortgage lender.  You never know what financial situation some of these companies are in and some of them may be desperate enough to give you the deal of a lifetime.

Make sure to check in with Subprime Blogger every Sunday as I post my weekly Refinance article.  Bookmark the link below to access the content easier.

• Refinance Sunday

Each and every lender is advertising that they are providing mortgage rates under 4.9% but does this really matter if you do not qualify?  The advertised rate could be 2.25% and it would not matter if the only individuals who could qualify for them need an 840 credit score and 75% equity in their home.  While this is a bit drastic, it proves my point.  In today’s housing market, many homes have lost significant value due to the struggling economy.  You may not realize it, but your home may be 40% less in value than it was a the peak in your housing market.

Unfortunately there is very little you can do about this.  The one thing that could help you get a lower rate is to work on improving your credit score.  If you have a balance on any credit cards or a student loan, now might be the time to pay them off to improve your credit score which in turn may get you a better mortgage rate.  It is a catch 22 as credit card and loan rates are also at an all time low so it might not be beneficial to you to pay them off if your rate is under 4% like many Americans.

Ultimately, you never know if you will get a refinance rate under 4.9% unless you try.  Check with several lenders and ask some of your friends who have recently refinanced.  Each market is different so you may be able to get a rate at 4.5%!  Each Sunday I write a column on refinancing so make sure to check it out weekly.  Bookmark the link below for easier access to the content.

• Refinance Sunday

As many of you know, mortgage rates are at their lowest levels since Freddie Mac started collecting weekly data in 1971.  There is little doubt that now is a great time to refinance.  The only problems that homeowners may come across is a bad credit score or the value of their home has greatly declined in the last two years.

Buying on credit has become a sickness in America and it may hinder your refinancing process.  If your credit score is below 720, you are not going to get the advertised mortgage rates under 5%.  Mortgage lenders know what happens when they take on risky borrowers.  The subprime mortgage crisis is fresh in their minds and they do not want to take on those challenges again.  With the swarm of mortgage refinance applications being submitted lenders can pick and choose who they want to refinance.  Mortgage lenders won’t be overall picky with who gets to refinance as the government is providing incentives for them, but they will choose wisely this time around.

The value of homes in America has greatly dropped over the last two years.  What many of you may not realize is that the value of your home may be worth MUCH less than it was two years ago making it difficult to get through the appraisal process.  If your home’s value has greatly dropped, the amount you have put into it is no longer as impressive as it was two years ago.  You may actually owe more than the house is worth even after paying on a mortgage for several years.  Obviously there is nothing you can do about this, but be aware of this issue before you fill out your mortgage application.

If you have no concerns with either of these issues, I would strongly suggest you attempt to refinance now.  If you wait for mortgage rates to fall even more, there is a chance that the value of your home will continue to decline.  There is also a chance that mortgage lenders will not have the capital to refinance your current mortgage if you are not in the first wave of applications.  There are many websites that you can check to get some quotes with one of the best being amerisave.com.  To see where home values and inventory are headed in your area, make sure to check out Housing Tracker.  I check this site every week to make myself aware of overall trends in the different housing markets.

Something else that is very important in your market is the unemployment level.  If there are predictions that the unemployment rate is going to continue to increase in your market, the value of your home will continue to decline.  If people are losing jobs and do not have money, there is no reason for outsiders to move into your market to buy up the homes for sale and the new homes that have been built.  A great site to check this and historical unemployment information is the Bureau of Labor Statistics.

Make sure to check back each Sunday as I will write my weekly column on refinancing and the road ahead.  Bookmark the page below to make it easier to access the information.

• Refinance Sunday