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Refinancing homeowners who want to cash in on record mortgage interest rates had better get prepared to beat the rush.
When interest rates shrink, mortgage activity balloons, the paper-intensive loan underwriting process bogs down and the best prepared borrowers go to the front of the line.
"Too often borrowers are indecisive, they don't communicate with their loan agent and they aren't up front about issues involving their property, their credit or their income," says Rob McCarthy, senior mortgage consultant with Menlo Park Mortgage in Menlo Park, CA.
That kind of behavior could delay your application and cause you to lose out on rates that are about as low as they can get.
As of Sept. 17, the average interest on 30-year fixed-rate mortgages dropped to 6.66, surpassing the record of the 6.74 percent, set in October, 1993, the lowest since Freddie Mac began tracking the rates in 1971.
"These are devilishly low rates. They haven't been this low in 30 years. While we don't have all the data, rates haven't been this low since sometime between Woodstock and the Tet offensive," said Robert Van Order, Freddie Mac's chief economist.
"Not only have mortgage rates fallen to historical lows, they have remained at such levels for a record-breaking 13 weeks," said Van Order.
Low rates helped push up refinancing applications to 55.4 percent of all mortgage applications in in the week ending Sept.11, according to the Mortgage Bankers Association of America.
"We are seing another refiancing boom," said Robert Van Order.
Everybody's doing it
Some lending experts say because mortgage interest rates have been low for so long, many homeowners have already refinanced. The experts concede, however, that lenders are busier than ever with first mortgages, equity loans and other mortgages as well.
Fore the week ending Sept. 11, all mortgage applications were up 80.2 percent from the same period a year ago, according to the mortgage bankers association.
"There has been an increase in refinance calls by about two to three more every day, but more telling than the number is the source. I am getting more calls from Realtors asking about rates for their own properties. Also, I'm thinking about refinancing," said Mike Donohoe, a loan officer with Silver Creek Financial in San Jose.
Skip that morning cup o' joe
"Start calling first thing in the morning, before lenders get swamped," said Bruce Hahn, president of the American Homeowners Foundation in Arlington, Va. Thoroughly study mortgage programs as completely as possible before completing applications that trigger credit checks. Too many credit checks cause delays and lower your credit rating.
To speed up the process, consider stopping by a lender's or broker's office to pick up an application.
Be prepared
Consumers seeking a refinance should begin by getting all their "docs" in a row. Lenders generally want to see a month or two worth of pay stubs as proof of income, two years worth of W2 forms to prove steady employment and three months worth of statements for checking, savings, stock and other savings or investment accounts. Lenders will also request two or more years worth of tax returns if you are self-employed.
"Having these items at the loan application appointment reduces the time of loan approval by two weeks because it eliminates the need to mail for verification," McCarthy said.
Fill out applications and other documents accurately and completely adding "not applicable" (or "N/A") where appropriate instead of leaving blank spaces to minimize questions the lender will ask. Return application materials as quickly as possible along with any checks for fees.
When you open escrow, ask for the Statement of Identification (sometimes referred to as the Statement of Information) which the title company needs to perform an accurate title search. Companies typically wait and mail the form to you days after you open escrow. Complete the form quickly and accurately and return it to the title company. When you visit the title company, always carry adequate identification -- a driver's license, a state identification card, a current passport or U.S. military identification.
Use technology
Visit Internet sites including E-Loan, Get Smart, Home Shark and others where educational information, market reports, rates and applications are available.
"I prefer to do most tasks via e-mail. Any time my clients have a question, they can simply e-mail me," says McCarthy.
Use technology, but don't rely solely upon it. Web-based mortgage origination can save money, according to some reports, but the jury is still out on who gets the savings.
Online originations appear to work best for straight forward applications from those with the best credit records and fewest abnormalities, but not always.
Computers and the underwriting process slows down for everyone when demand exceeds capacity and, on-line, a warm body may not be there to hold your hand.
Get the rate locked
A rate lock (in writing) could cost you cash up front, but it can save you time later. The lock, placed after your application is complete, guarantees you the current rate for a set period of time or allows you to wait for a specific, hopefully lower, rate -- provided it ever arrives.
"The most common mistake people make is unrealistic expectations. Advertised rates are those for borrowers with the best credit histories. Consumers who find their credit to be a stumbling block to the best rates, should spend their energy on credit repair and management rather than a frustrating search for that "A" loan," says Donohoe.
Hurry up, but scrutinize
It may not speed up the process but, because of the flood of documents churned out in a mortgage application, it behooves the borrower to pay very close attention to and read all his or her closing loan and title documents.
Professionals make mistakes, especially when the pressure is on.
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