Rates remain near record lows, but few are actually qualifying for those rates
Last week, Freddie Mac's Primary Mortgage Market Survey showed average fixed interest rates on 30-year mortgages dipping below 4% for the first time. Rates rose a bit this week, now back above 4%, but they still remain very, very low on a historical basis. So if you are buying a home or wish to refinance, then it is a great time to get a new mortgage. That is, if you can qualify. Many Americans can't.
Only the Well-Above-Water Need Apply
Have a look at a key detail about the criteria for mortgage quotes from which Freddie derives its weekly mortgage interest survey:
The survey is based on first-lien prime conventional conforming mortgages with a loan-to-value of 80 percent.
So for starters, this rate is for prime mortgages. You probably assumed that, but this point is actually very important since we're talking about averages. Some prime borrowers face higher rates and some get lower rates. But this means that non-prime borrowers likely faced significantly higher rates -- if they can qualify for a loan at all.
But the second criterion is even more significant. Let's say that you have a house worth $200,000 and a mortgage balance of $175,000 that you want to refinance. Your loan-to-value ratio would be 87.5%, so you wouldn't be included in this average. You might manage to achieve a low rate, but someone with so little equity shouldn't expect to necessarily achieve rates near this average.