Lenders’ mortgage rates today are super low – but not necessarily for everyone

“Mortgage Rates Decline” was the top story on the front page of today’s Wall Street Journal. It’s refreshing to read such positive financial news these days, of course. But homeowners in San Francisco and other expensive parts of the country should be aware that the news for them may not be quite as exciting.

First, let’s take a look at the news, in case you missed it.  

Mortgage rates dropping instead of rising

Mortgage rates were expected to rise this year. But the European debt crisis and growing concerns about the global economy are causing many international investors to put their money into a safer haven: U.S. bonds.

Mortgage rates are tied to yields on 10-year Treasury bond notes, which dropped to 3.2 percent Friday due to the “massive wave of cash into U.S. bonds from investors around the world,” the Journalreported. The decline subsequently caused mortgage rates to fall.

The end result: Last week, banks and mortgage brokers started seeing a huge spike in refinancing requests. One broker quoted in the Journal said he helped a borrower lock in a 30-year fixed loan with a 4.25 percent interest rate. It was the lowest rate the executive had seen during his 24 years in the business.

By comparison, the Journal noted that “nearly half of all borrowers with 30-year conforming fixed-rate mortgages have mortgage rates of 5.75% or higher and could reduce their rates by a full percentage point if they refinanced at current rates.”

So what’s the catch?

Keep in mind that the absolute lowest mortgage rates are given to those who own and occupy their house, have solid credit scores, and have aconforming loan.

A conforming loan for a one-unit property has a financed amount less than $417,000. In San Francisco and other high-cost areas, there’s what is known as a super conforming loan, as well as jumbo and super jumbo loans. These loans typically have higher rates than traditional conforming loans.

The super conforming loan limits are currently between $417,000 and $729,750 for one-unit properties. The $729K ceiling is set to expire at the end of 2010, after which the super conforming loan ceiling will be $625,500 for one-unit properties. Fannie Mae’s eFannieMae.com site offers a downloadable Excel spreadsheet with details on loan limits.

Those who own or are buying condos or multi-unit investment properties are often subject to higher mortgage rates as well, compared to those who own and occupy a single-family home.

Bottom line: If you’re a San Francisco homeowner, you might not be eligible for the most amazing mortgage rates. Even so, if you’ve had any thoughts of refinancing, now’s the time to act.

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