Mortgage Applications, Refis Hurt by Job Market Stagnation

Minnesota homeowner Matt Kreger refinanced his $168,000 mortgage into a 4.75 percent 30-year fixed-rate three weeks ago, to get out of a 5-year, interest-only ARM with a 5.7 percent rate, which was set to change at the end of September.

Borrowers such as Kreger were part of a push before Labor Day to close on the greatest number of mortgage purchase applications since May. And, new mortgage data indicates, just before interest rates on 30-year and 15-year loans increased slightly last week. The Mortgage Bankers Association reported a 6.3 percent increase in purchase applications over last week's data, which revealed a 37 percent drop compared to the same week in 2009. This week's numbers show that purchase applications are 38.8 percent lower than the same week one year ago.

"My payment is about the same, only $50 more, but I am paying more toward principal," says Kreger, of Eden Prairie, who works in the residential new construction and remodel industry.

Kreger also is maintaining a second mortgage of $35,000 at 7.875 percent that he couldn't refinance. "My mortgage is upside down," he says. "So I still have the two loans, which sucks." In order to refinance both loans into one, "I would've had to bring $30,000 to the table," he adds. "I was not going to liquidate all of my assets to refinance my house, especially not with my industry. I am lucky to have a good salary, but we are doing more work on smaller jobs and not making as much money as we used to make."