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Mortgage Applications Fall Despite Lower Rates

[Apr 16, 2009.]


According to Freddie Mac’s Primary Mortgage Market Survey released today 30-year fixed-rate mortgages averaged 4.82 percent with an average 0.6 point. This is down from last week’s 4.87 percent average, and far below the average last year at this time — 5.88 percent.

“The housing industry is starting to exhibit some positive signs, albeit scarce and too early to tell how permanent,” says Frank Nothaft, Freddie Mac vice president and chief economist.

Despite lower rates, mortgage application volume dropped 11 percent for the week ending April 10th, according to a weekly survey released Wednesday by the Mortgage Bankers Association.

The Passover and Easter weekend may have contributed to the fall in application volume. The Mortgage Bankers Association said it did not include any adjustment for the days consumers chose to observe the religious holiday over applying for a mortgage.

Others believe that some homeowners are simply waiting until rates hit the bottom before jumping in. Their goal is to refinance when rates have hit their lowest level to snatch up the most savings. Unfortunately, this may not be the wisest strategy given the volatility in the real estate market and with underwriting guidelines.

While timing the bottom of a market is near impossible, there are plenty of other reasons that one should refinance when they are able to (and it makes financial sense) instead of trying to grab the best rate.

Underwriting times have edged up for many lenders due to recent spikes in application volume. A lot can happen while a homeowner waits for their loan to be processed and underwritten that could jeopardize the likelihood of loan approval.

A listing of examples like losing your job, underwriting guidelines changing, storm damage to a home, and drops in credit score can be found at The Mortgage Reports blog.

Homeowners that currently qualify to refinance but who are waiting for rates to drop further are putting themselves at risk - risk of their future loan application being denied.


About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges.

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