They are NOT at any advantage today if they don’t qualify for a refi today. They actually screwed themselves by getting a no cost loan when they did qualify for a better fixed rate than they have.
For some people if they do qualify today then I suppose it worked out, however isn’t it really just gambling and luck ?
In today’s real world, there are a few major risks in just assuming that one will qualify for a lower rate refi just because rates drop…
Going forward, nobody has any idea of any of the following:
1) Future credit score
2) Future house value
3) Future rates
4) Having a job
5) Having one recent late mortgage payment on their credit
6) Ability to work
Any ONE of the above can kill someone’s chance of getting a loan. Without subprime, there are no other options. It’s not like you can get a 7% loan instead of 5%…many people simply do not qualify, period.
If you don’t qualify by guidelines, there is no loan for you. I have callers with lots of equity, OR lots of income, OR a high credit score OR a pile of cash in the bank; but for one reason or another they have zero chance of getting a loan.
Millions of people had equity last year and have little to none today. Most 80% loans a year ago have less equity today and require mortgage insurance.
Without realizing it, some people have gambled away their security and future. Most people have no idea how much trouble many people are in.
Some of these people think that they will just wait and get a loan at the cheapest rate ever, just because they want to.
When rates were over 6%, people would have killed for 5.25%-5.50%… now that rates are near 5%, they want even lower rates..
Anyone who loses a job, instantly loses their chance of refinancing. etc.
Most people are not in a better situation today. They definitely would have benn better off having bought down their rate.
You know the old saying… bulls & bears make money but pigs (not Pigg’s!) get slaughtered.
I could go on, but I think that you get the point.
.HLS
