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Mortgage rates have fallen to their lowest levels ever, making this a golden opportunity to refinance.

But many people can't. Homeowners who want to refinance in today's tougher lending environment face hurdles.

Credit scores must be higher than they used to be. Debt loads must be smaller. Employment must be documented.

The biggest obstacle? A lack of home equity. Some people owe more on their mortgages than their homes are worth. They're considered "underwater." Banks aren't inclined to lend to them.

But for those with stable jobs, extra cash, little debt and some home equity, low rates could allow for sharply reduced mortgage payments.

_ BARRIERS TO ENTRY

For many homeowners, refinancing is impossible.

The lowest rates are generally reserved for those with credit scores of 720 or more, said Mark Goldman, a Southern California mortgage broker who lectures at San Diego State University. About 40 percent of U.S. homeowners have scores that high.

You'll also typically need at least 10 percent equity in your home. Depending on where your home is, the required equity might be as high as 20 percent.

"It's tough to refinance a loan these days," Goldman said. "Only the select few can qualify."

Roughly 11 million U.S. homeowners _ about 23 percent of Americans with a mortgage _ are underwater. Some underwater homeowners with government-backed mortgages might be able to refinance through federal programs, such as the Home Affordable Refinance Program.

But these programs are generally limited to those who have lost no more than 10 percent of their home's equity. In many hard-hit areas, such as Phoenix, Las Vegas and Tampa, Fla., home values have shrunk 60 percent or more.

_ WHEN TO REFINANCE

The rule of thumb has been that it makes sense to refinance if a homeowner can save 1 percentage point on the current rate. Those who haven't refinanced in the past few years and who plan to stay in their home for at least five years are best positioned to save.

If you've been paying your mortgage for 15 years or more, it's sometimes not wise to refinance. In the latter years of a mortgage, a larger portion of your payment applies to principal. That builds equity. If you refinance late in your loan and don't reduce the loan's duration from, say 30 to 15 years, you'll build less equity.

In some states, you might also face prepayment penalties if you pay off your mortgage early or refinance. In some cases, though, these penalties can be waived.

_ WHAT YOU'LL NEED

Homeowners need pay stubs and bank statements to document assets and income. Lenders generally frown on household debt that exceeds 45 percent of a family's gross income.

A solid credit score of at least 680 is also important, said Mike Anderson, a broker at Essential Mortgage Co. in Baton Rouge, La. That's because lower credit are typically subject to higher extra fees.

"Once you get below 680, it gets dicey," Anderson said. "With all the add-on fees, it may not be worth it."

But the low rates, if they can be had, can produce big savings. A homeowner would have to pay roughly $1,074 a month for a 30-year, $200,000 fixed mortgage at 5 percent. If that rate were cut to 4 percent, the payment would drop to $955. The savings would be $119 a month, or $1,428 a year.

_ WHAT IT WILL COST

Homeowners typically pay a few thousand in closing costs. An appraisal fee can cost 1 percent of the loan value. Extra costs, sometimes called "garbage fees," include application, inspection, notary and recording fees.

These fees, called points, now average 0.8 point on a 30-year fixed mortgage. One point equals 1 percent of the loan amount. That means the 0.8 percent in extra fees on a $200,000 loan would run $1,600.

An example of how fees can increase costs: This week's average rate on the 30-year fixed mortgage is 3.94 percent. It's the first time it's ever been below 4 percent. But once extra fees are added in, the effective average rate rises to 4.12 percent.

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