Securing a mortgage increasingly difficult, MBA finds: These refinance options could make it easier

It’s becoming more challenging to secure a mortgage as the amount of mortgage credit slips, according to new data from the Mortgage Bankers Association (MBA). 

Mortgage credit availability declined in June to its lowest level since September 2020, marking the first decrease after half a year of growth, according to the MBA’s data analysis from Ellie Mae’s AllRegs Market Clarity business information tool. Lowering credit means it will be more difficult for borrowers with less-than-perfect credit profiles to obtain a mortgage.

When lenders tighten standards, they're decreasing their risk and lend to consumers with higher credit scores, incomes, or less credit already in their name. 

Despite lenders growing more cautious, there are some mortgage refinances programs that cater to low-income homeowners. Visit Credible to compare your mortgage refinance options from multiple mortgage lenders at once and save money on your monthly payments.

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New options keep mortgage refinances available

In the first half of 2020, as the coronavirus pandemic began to take hold, lenders became more conservative and started taking fewer risks in lending. The level of risk they are taking now is far less than even an average risk amount, according to data from the Urban Institute.

"The overall credit availability index remains close to 2014 lows, as mortgage credit has not recovered since the sharp downturn in the first half of 2020," said Joel Kan, MBA associate vice president of economic and industry forecasting. "We did see the addition of refinance programs designed to reduce costs for lower income borrowers, but the full impact of those new loan programs remains to be seen."

Earlier this summer, the Federal Housing Finance Agency (FHFA) announced new refinance options for low-income borrowers. Available through any lender that creates loans backed by Fannie Mae and Freddie Mac, the option is expected to save borrowers from $100 to $250 on their monthly payments.

If you are interested in seeing how much you could save on your monthly mortgage payments through refinancing your loan amount, visit Credible to find your personalized annual percentage rate in minutes.

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What is a good refinance rate?

As mortgage credit availability declines, those with poor credit will be affected since they will be unable to qualify for a mortgage, or their home loan will have a much higher interest rate. Average interest rates for mortgage loans change daily; what's considered a reasonable rate today is entirely different from a good rate five years ago or even last year. 

Currently, the average 30-year fixed-rate mortgage has a refinance rate of 2.88%, while a 15-year averages 2.19%, according to Freddie Mac data. Mortgage rates below the 3% mark are considered very low, and currently, rates are hovering just above their all-time lows. Other options such as adjustable-rate mortgages have lower interest rates, but could increase rates and mortgage payments after the original loan term expires. 

However, interest rates are expected to begin rising later this year. If you want to take advantage of lower rates through refinancing your current mortgage, visit Credible to get prequalified in minutes without affecting your credit score.

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