Is the Government Helping You to Refinance?

Since February, the United States government has tried extremely hard to give common Americans a chance to refinance at rates that are near historical lows.  Prior to March of 2009, home owners found it very hard to refinance with a loan-to-value ratio over 95%.  With the new government Making Home Affordable Program it is now possible to get a low rate refi with a loan-to-value ratio of over 100%.  The limit that most lenders are willing to take is 105%.

With this being the case, one would think that the amount of refinancing would skyrocket.  Who could resist getting a refi under 4.9% with a loan-to-value ratio of over 100%?  Well, the problem so far has been that homes are getting appraised at rates much lower than home owners expect.  If a home was purchased for $200,000 in 2006 and the appraisal value is now $149,000, it is highly unlikely that the current home owner will have a LTV of anything near the needed 105%. 

There is no way to combat this as the value of a home cannot just be increased instantly.  Many homes would have a much higher value but there has been a foreclosure or short sale in the neighborhood or close by.  This greatly hurts the overall value of the home but it is not the home owners fault.  The best thing that most home owners can do is to get an accurate appraisal before they decide to go through the refinance process.  Some home owners may be very surprised that the value of their home has greatly decreased in the last six months.