by Broderick Perkins
(9/19/2011) - If you want to refinance your mortgage today, you may need to hire a place holder for the growing line of homeowners.
On Tuesday, Sept. 13, 2011 the rate for conforming 30-year mortgages was averaging 4.36 percent, down from 4.42 percent the previous week and 4.50 a year ago, according to the weekly Erate Interest Rate Update, produced by Santa Clara, CA-based Erate.com.
Two days later, Sept. 15, Freddie Mac's weekly Primary Mortgage Market Survey reported a second week of record lows with an even lower 4.09 percent average, down from 4.12 percent a week ago and 4.37 percent this time last year.
Erate.com reported the lowest 30-year fixed rate mortgage had a 3.65 percent interest rate, also lower than the lowest rate a week before.
The low rates are causing a rush on refinancing and that's nearly doubling the time needed to close a deal from 30 to about 60 days at some mortgage merchants.
The Mortgage Bankers Association's Weekly Mortgage Applications Survey reveals, for the week ending Sept. 14, refinancing accounted for more than 77 percent of all mortgage applications. That's up from it's lowest share this year of about 65 percent back in February.
The association's Refinance Index for the week ending Sept 14 was 23.5 percent lower than the same week a year ago, but the index was up 6 percent from the previous week, after three weeks of decreases.
Processing time is up, in part, because the rush comes after many large banks downsized following the housing bust. More mortgage workers were let go over the winter when rates were on the rise.
Also, when the economy crashed so did the easy-money mortgage assembly line. Tighter regulations, underwriting squeezes and heavier disclosure requirements are exacerbating the delays.
Given the thinned ranks of mortgage workers, the rush-to-refi trend could be at logger heads with the Obama Administration's plan to boost housing by promoting refinancing underwater mortgages owned by Fannie Mae and Freddie Mac.
Refinancing that reduces payments could put spending money in the hands of consumers, while banks could cash in on loan origination fees, hopefully a win-win for the economy.
The refinancing crowds and stiffer underwriting rules mean you better have you docs in a row before heading to your friendly neighborhood mortgage lender.
You aren't a good candidate for refinancing if your credit score isn't high enough, if you don't have enough equity in your home and you can't prove your income, assets and stable employment are sufficient to enable you to comfortably repay the new loan.
How to fast-track your refinance
• Visit AnnualCreditReport.com for a free credit report to see what's making your credit score rise or fall. The credit score is a numerical analysis of your credit report. The higher the score, the lower the interest rate on your mortgage. The lower your score, the lower your chance of refinancing.
• Visit the myFICO.com web site to learn how your credit is scored and what you can do to push it higher.
• Be prepared to back up or argue the appraised value of your home with price comparables of recently sold, refinanced or listed properties similar to your own.
• Be prepared to document not only your employment and income, but also tenure. Likewise have the paperwork to prove your debt burden is low and that you have ample savings and liquid assets to handle property taxes, homeowners insurance premiums, maintenance and your monthly mortgage.
Additional refi tips
It's a good idea to visit your existing lender first, especially if it doesn't sell loans. Lenders who keep loans have a vested financial interest in keeping its portfolio intact with good paying customers.
Window shop other banks, credit unions and lenders that retain loans.
Also consider lenders that allow you to retain your second mortgage, while refinancing only the first mortgage into better terms.
If necessary, seek lenders that will allow you to adjust the mortgage split between your first and second mortgage to keep them both at or below conforming loan levels that come with cheaper rates.
If you are refinancing to stave off foreclosure, don't hesitate. Make the move before you miss a payment. The further you fall behind, the more options leave the table.
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