While the Housing Market May Be Solidifying, Refinancing is Still Higher on Newer Mortgages

According to Reuters, Prime mortgage borrowers that have refinanced newer mortgages since the start of 2010 are continuing to grow. The report also reflects that the credit history of the refinancing residential mortgage holders is higher than they have been historically. Consequently, the refinance loans are also being paid back faster than standard prime mortgage loans.

Some high points of the report:

• Prepayment rates for transactions issued between the start of 2010 and the middle of 2012 have remained notably high.
• The elevated prepayment rates have resulted in rapid declines to the mortgage pool balances.
• While mortgage rates declined close to 140 basis points from early 2011 to July 2012, rates have remained relatively stable since that point.
• Even a relatively modest increase in mortgage rates from today’s levels could result in relatively slow prepayment behavior.

What does this mean to residential mortgage holders who may be looking at refinancing their existing mortgage?

Simply put, that the time to consider a refinance is now. While property values continue to stabilize, the fast repayment of previous refinanced mortgages over the last 3 years is still threatening to decrease the mortgage pool. As the financial backing for loan potentials in the near future, lenders will find it harder to meet the needs of home refinancing mortgage holders, even those with good or great credit ratings.

What Documents Will You Need to Refinance Your Home?

The refinance process is very similar to the mortgage loan process, but it’s truncated in comparison. When you are looking to refinance your current residential mortgage, you will need to be sure that you have certain documents and criteria to show when you apply for the refinanced mortgage.

What to Bring With You

Proof of:

• Income – Current pay stubs or last year’s tax return
• Employment
• Account Balances for credit cards (liability) or bank (assets)
• For self-employed individuals, you will need to produce two consecutive years of tax returns, a Profit and Loss statement
• Blank checks to pay for the appraisal and your most recent credit report.

Once you gather the above criteria, take a look at your credit rating and ensure that all the creditors listed are valid as well as their balances. Clean up any mistakes on your credit report before applying for your refinanced mortgage loan.

Refinancing mortgage loans offers homeowners a way to reduce their monthly debt, or the length of their residential mortgage loan. But, as noted earlier, the consistent solidifying of property values is going to make refinancing at these historically low interest rates more difficult as time goes on. If you intend to refinance your mortgage loan in 2013, start getting your documents and files together now and call your local residential realtor to begin the process while the rates are still low.