Mortgage rates are down, but who cares if you can't qualify?

For the first time since mid-2005, fixed-rate mortgage rates have dipped below 6%, but this time refinancing will be much tougher for those wanting jumbo mortgages or without decent credit scores. Jeff Opdyke from today's Wall Street Journal explains:

For the first time since 2005, mortgage rates have slipped well below 6%, ending last week at about 5.87%, according to mortgage tracker HSH Associates. Some lenders are offering even lower deals. At these levels, about 37% of homeowners could refinance their mortgages and save money on their monthly payment, estimates investment bank Bear Stearns Cos...

But here's the catch, and it's a big one: Many homeowners won't benefit, either because their mortgage is too big or their credit score is too low. In other cases, falling home prices will make it tough for them to refinance.

Consequently, I'd expect to see almost all of the presidential candidates call for rises (even temporary) in the conforming loan limits because rates for jumbo loans remain much higher:

Jumbo rates, lenders say, aren't coming down alongside conventional rates because buyers of those mortgages in the secondary market remain skittish. As such, today's jumbo rates are well above the existing rates many homeowners currently have on their mortgage, meaning "there's no reason to refinance," says Jay Steren, CEO at Mortgage Capital Associates, a Los Angeles mortgage banker...

Indeed, the definition of jumbo could actually be changing soon. For months, Congress has been debating the idea of raising the limit on jumbo mortgages, possibly to $600,000 or more. If so, that would allow a larger number of borrowers to refinance at lower rates. But just what will happen, and when, remains uncertain.

And yet sometimes the best deals can be where you bank locally rather than through a broker:

"You need to do some legwork, scour the market, to find the best rates," says Keith Gumbinger, vice-president of HSH. He suggests starting with lenders who often keep on their books the mortgages they underwrite, such as local banks, thrifts and credit unions. "They can easily be a half-percent lower than the averages," he says.