by Broderick Perkins
(4/4/2012) - What's holding you back? Jump on that refinance band wagon.
Projections that interest rates could rise should send you clambering for a refinanced mortgage, even if you think you won't qualify.
The Mortgage Bankers Association (MBAA) said on April 4, it's Refinance Index rose for the first time in six weeks and by a hefty 4 percent. The index rose as average refinance rates on 30-year fixed rate conforming loans slipped below 4 percent again, to 3.99, according to Freddie Mac's report a week earlier.
The refinance share of mortgage activity was 71.2, with purchases making up the small remainder. The average interest rate for contracted mortgages with conforming loan balances ($417,500 or less) decreased to 4.16 percent from 4.23 percent. That was for 80 percent loan-to-value mortgages, according to the association.
Special programs like the Federal Housing Administration's Streamlined Refinancing Program and the improved Home Affordable Refinance Program (HARP) can get you in the door with little to zero equity - even if you owe more than your home is worth with HARP.
However, in the tight-money, open mortgage market you may not be 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 that your income, assets and stable employment are sufficient and stable enough to enable you to comfortably repay the new loan.
Projecting rates could move higher later this year, Freddie Mac, Fannie Mae and MBAA say the average 30-year fixed-rate mortgage interest rate could reach 5 percent later this year.
A jump in yields on 10-year Treasury notes in recent weeks is the blame, economists say. Rates typically track the 10-year Treasury. With the economy gearing up for growth, former Treasury investors are bailing the safe haven investment to try their luck in Wall Street's riskier stock market holdings.
The Federal Reserve's "Operation Twist" temporarily pushed down long-term interest rates, but it ends in June and that could threaten low rates.
And there are also the usual suspects, war, disasters, Euro zone meltdown, etc. that could also impact rates. Actually an improving economy can encourage lenders to raise rates too.
So, again, what's your hold up?
Fast-track your refinance
• Use the information-laden internet to school yourself in refinance information.
• Visit AnnualCreditReport and only AnnualCreditReport.com for a truly-free-no-strings-attached 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. You'll have to pay for your score but if you are in the market for mortgage finance, buy it.
• Visit the myFICO.com web site to learn how your credit is scored and what you can do to push it higher and prevent it from falling.
• 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 - including distressed properties in your hood.
• Be prepared to document not only your employment and income, but also tenure on the job. Lenders today like to see stability. 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.
• When shopping for a refinance, 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 to compare 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.
• Also consider 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, you should have done all this yesterday. Make the move before you miss a payment. The further you fall behind, the more options leave the table.
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