Nov 18, 2009 2:03 pm US/Pacific
Act Now On Refinancing - Or Kiss Low Rates Goodbye
NEW YORK (CBS News) ―
Procrastination can be costly in financial affairs, especially with the biggest combined asset and debt most of us own and owe: our home and the mortgage we pay for it. There's a window of opportunity right now in the mortgage market that seems likely to close in months ahead – one you may regret not capitalizing upon.
The average interest rate on 30-year fixed mortgages dipped last week to 4.83%, the lowest in six months and less than a quarter percent above the record low 4.61% in March, the Mortgage Bankers Association reported today. Don't count on it staying this low much longer.
Procrastinating refinancers who failed to act in the past year may have been lulled into thinking we'll be forever blessed with the sub-6% mortgages we've seen since last November. Today's Consumer Price Index report, however, raised the specter of inflation ahead — not to mention the interest-rate hikes that will be necessary to combat it. Once a rising rate cycle gets underway, you can kiss 4% mortgages goodbye. (Then pray they don't come back, because it will take economic calamity to bring them that low again.)
One advantage of refinancing now is that you'll find mortgage lenders eager for your business. Applications for purchase mortgages fell last week to a 12-year low, owing the fact that an $8,500 federal tax credit for first-time buyers was close to expiring. (Technically, it applied to mortgages that closed by Nov. 30.) But the long lines will probably be back soon, as the tax credit will now cover all sales contracts signed by April 30, with a $6,500 credit added for move-up buyers.
Just be prepared for rigorous scrutiny of your application by any lender even if you have a good credit rating, says Sarah Tinsley, the Mortgage Bankers Association's vice president of public affairs.
"They're writing the best loans they ever have, but at the same time, underwriting is much stricter," Tinsley says. "They're looking closely at verification of employment and income. The borrower has to come in knowing they may have to provide a lot more documentation than for any mortgage they've taken out in the past."
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