Yesterday, the Federal Reserve lowered its key federal funds rate to “a target” of 0-.25%. Combine this with the Feds commitment to buying mortgage backed securities from Fannie Mae and Freddie Mac and I think it might be safe to say that rates are probably going to trend lower for a period of time.
Which means that there is probably going to be quite a few people who are going to want to refinance — all at once!
Having seen a boom cycle and a bust cycle in the mortgage industry, here are just a few things that you can reasonably expect when refinancing:
- Your loan will probably take longer than it “normally” would. Lenders will be backed up because they have reduced staff over the last year and there simply isn’t enough operations staff to handle the crush of files.
- It won’t just be the operations staff who will be over-worked, vendors such as title companies, appraisers, inspectors – they are probably going to watch their workloads increase dramatically.
- It is probably going to be harder to find a loan officer to help you – you may even have to *search* for one… there just aren’t that many left!
- Be ready to document your income. If the last time you thought about your mortgage was a couple of years ago, guidelines have changed since then — there is no such thing as “stated income” loans in today’s mortgage market.
- Be ready for the underwriting department to ask for more documentation or additional information of all kinds — such as an extra month’s bank statements, more comparable sales information on the appraisal, etc. Underwriters are being more careful and critical than they have been in the past.
Be ready to refinance more than once. Ok, so maybe this won’t happen – but if the general trend of interest rates is down for a period of time, it can often make sense to refinance more than once as interest rates drop.