Brace Yourself for an Onslaught of Refinance Incentives from Banks

If you’ve ever subscribed to the old saying “strike while the iron’s hot” then you might want to get ready to pounce into action with regard to refinancing your home. This week, Informa Research Services reports that 15-year mortgage rates came in at an average of 3.43%, with 30-year fixed rates at 4.15%. Sound too good to be true? See for yourself here. If by the time you’re done verifying this great news – which reflects claims that mortgage rates remain lower than they have been in about a quarter of a century – you haven’t already flown out the front door to find the nearest bank offering the best rates, then maybe the next bit of news surely will.

Applications for refinances are down. And as far as lenders are concerned, this isn’t the most desirable of possible circumstances for their bottom line. After all, their business is lending money and writing new loans and if they’re not doing that, they’re stagnating. So what does this mean for you? For one thing, it means that you can expect banks to busy themselves trying to dream up new and exciting ways of encouraging you to consider refinancing your home. If you’ve been on the fence about it for some time – or even if you’ve just hopped onto that proverbial fence – expect to be hit with a slew of incentives from lending institutions eager to take on your refinanced mortgage. To hunt down the lowest rates, be sure to visit online rate tables for the latest numbers.

So what kind of incentives can you expect to see? Aside from the obvious appeal of securing your home refinance at a much lower rate than you currently have it, you’re likely to see a lot of the following kind of activity coming from smaller banks and regional lenders.

• Dramatically lowered fees.
• An increased willingness by lenders to let you roll your fees into your mortgage instead of paying them at closing.
• Free 60-day rate locks that ensure even if rates suddenly jump before you’ve finalized all the details of your refinance, you’ll still secure the original rate quoted you.

While Informa Research Services agrees that additional incentives are a great benefit that can save refinance customers a bundle of money in the long and short term, what’s even more important is securing the lowest possible interest rate. Therefore everyone considering refinancing should do their due diligence by shopping for the lowest possible rates before considering accepting any incentives.

Naturally, banks aren’t just going to be giving away free stuff to anyone that comes knocking. There are three main things that lending institutions will always take a close look at when it comes to determining if they’re going to take on your refinance. These are: your credit score, proof of income, and equity. If you’re sitting pretty on a stellar credit score, pat yourself on the back and rest assured. For those who aren’t sure what kind of credit scores the lenders will be looking for, think: 740 and above. Expect to be asked to show two years’ worth of tax returns and at least three months of recent pay stubs to verify your income. Naturally, the higher the equity you have in your home the better off you’ll be in the eyes of the lender, but if you’ve got more than 10% under your belt, that’s considered optimal.