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The concept of “buying on the dips,” which refers to purchasing stocks when prices drop, can be applied to refinancing, says Keith Gumbinger, vice president of HSH.com in Riverdale, New Jersey.
“Basically, refinancing on the dips just refers to homeowners using an opportunistic approach to realize savings when mortgage rates drop,” Gumbinger says. “If you were thinking about refinancing last year and missed your opportunity because rates climbed in the fall and then you got distracted by the holidays, there’s still an opportunity now to refinance.”
Many experts have predicted that mortgage rates would climb to 5 percent or higher this year, but economic pressure and global tensions in the Middle East and Ukraine have kept mortgage rates in a lower-to-stable pattern through the first half of 2014. (Bing: Interest-rate predictions)
According to HSH.com, the rate for the 30-year conforming fixed-rate mortgage was 4.21 percent for the week ending July 18, compared to an average of 4.63 percent for the week ending Jan. 3. While this 2014 decline doesn’t come close to the 2013 rock-bottom rate of 3.49 percent for the week ending May 3, 2013, borrowers can still realize savings when rates dip.
Tracking the dips
“Mortgage rates rise and fall for a lot of reasons. You can look for clues about what will happen by following economic reports such as the statements of the Federal Reserve after their meetings every six weeks and the monthly employment report that comes out on the first Friday of every month,” Gumbinger says. “Rates will rise or fall depending on those reports and generally follow along with the fluctuations of 10-year Treasury bills. You can also follow mortgage rates through sites like HSH.com.”
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Planning your strategy
Mortgage rates typically follow the bond market, says Steven March, branch manager of Inlanta Mortgage in Oconomowoc, Wisconsin, so it’s possible to time your refinance.
“My best advice for a rate-sensitive refinance customer is to go ahead and begin the underwriting process and then ask your lender to set aside your loan application until a date when mortgage rates are down,” March says.
Preparing for the dips
March says that a lender can take 30 to 60 days to approve a loan based on your full mortgage documentation and paperwork, so he suggests floating your rate with a lender while an appraisal and title search are done and your income and assets are verified.
“You and your lender can watch mortgage rates during this time and lock your rate in at any time during the process,” March says.