Utah Homeowners Unmotivated by Low Interest Rates

 

While some real estate professionals are touting a recovery and an increase in sales activity, buying a home can still be a difficult process. Utah is clearly no exception. In a state known for large family homes, potential buyers are not flocking to open houses and even record low interest rates are not motivating them.

Because of very low mortgage interest rates, many Utah homeowners have looked into refinancing. Unfortunately, they are not going through with the process because they are finding the value of their home has declined. This leaves them owing more on their home than its current value. In the real estate business, this is known as being "upside down".

Low interest rates don't necessarily mean it is easier than to qualify for refinancing or new home loans. Homeowners with good equity and strong credit have a much better chance. However, many Utah homeowners are not able to utilize the low rates because banks and lenders have become far too stringent in their lending practices.

During the real estate boom several years ago, qualifying for a mortgage loan was almost as simple as being able to sign your name. Lenders, when faced with a problem borrower, used many different tactics to qualify buyers. One tactic in particular was selecting a friendly appraiser that a lender could count on to appraise the property at a sufficient level to qualify for a loan.

That has all changed. Lenders these days in Utah have to use appraisal management companies that randomly assign appraisers. While this practice has eliminated some of the problems, it may have created new ones. Appraisers have gone from overvaluing properties to routinely undervaluing them.

Borrowers, even those with good credit, equity and/or cash, are facing rejections on mortgage applications because properties are being appraised too low.

The global financial crisis will probably keep rates low for some time. The best advice if you are considering buying a home in Utah is to be patient and persistent. Eventually, it will pay off.

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