For consumers who want to buy a home and can't qualify for a mortgage, it has to be agony. Mortgage interest rates continue to fall, making homes even more affordable.
The big if, of course, is if you can qualify for a mortgage. But the decline in rates, coupled with rising home values, just might improve your chances.
Freddie Mac reports the average rate for a 30-year, fixed-rate loan, the most popular mortgage product, dropped to 3.62 percent from 3.66 percent last week. That's another new low, the 10th in the last 11 weeks if you are counting.
Rates continue to fall because depressing economic news has pushed Treasury yields lower. Since mortgage rates are tied to Treasuries, rates have reached another record low.
Bankrate.com's weekly survey puts the average 30-year fixed rate a bit higher, at 3.87 percent, but still near record lows.
Remember when six percent sounded low?
The last time mortgage rates were above 6 percent was Nov. 2008. At the time, the average 30-year fixed rate was 6.33 percent, meaning a $200,000 loan would have carried a monthly payment of $1,241.86. With the average rate now 3.87 percent, the monthly payment for the same size loan would be $939.90, a difference of nearly $302 per month for anyone refinancing now.
That savings might make the difference for prospective buyers who narrowly missed getting a loan. With the lower rate and lower monthly payment, the home they want to buy might now be in their price range.
Of course, there are other factors that can determine whether they qualify. They must have a good credit score, usually above 720. Also, they must bring a large chunk of cash to the table. Lenders have insisted that buyers put down 20 percent before getting a mortgage, though that could soften a bit now that home values appear to have begun rising again.
'Excessively tight' credit
"The recovery is occurring despite excessively tight credit conditions and higher downpayment requirements, which are negating the impact of record high affordability conditions," said Larrence Yun, chief economist of the National Association of Realtors.
If lenders begin to see that housing demand is increasing and home values are rising, they may, indeed, begin to loosen those "excessively tight" credit standards. That could boost home sales and, eventually, mortgage rates.
Can mortgage rates go any lower? Some people might not have expected to ever see 3.62 percent so calling a floor is risky. But if Realtors are correct that housing is beginning to recover, it might not be long before rates are rising once again.
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