What Should You Expect in the Mortgage Industry in 2011?

There could be some changes happening in the mortgage industry in the year to come. What are some of the changes to expect and how will they affect you?

Predicting what is going to happen in the mortgage industry is like trying to determine what the next Hollywood movie hit is going to be. It’s a shot in the dark and there is always at least a couple surprises. But analysts have made some predictions about the changes that are likely to occur in the mortgage industry in the upcoming year. Here are a few of their predictions.

1. Mortgage rates are going to go up. Let’s face it. Today’s mortgage rates can’t stay as low as they are forever. We’ve enjoyed a long period of historically low mortgage rates so they really have nowhere to go but up. Many analysts think the rates will hover around 5 percent in 2011 and they probably won’t reach the 6 percent mark again until next year. Even at 5 percent, you can get a great price on a new home if you qualify for the lowest rates in 2011.

2. The number of applications for refinancing will go down. In 2010, refinancing applications made up a large number of mortgage applications. In 2011 however, analysts are predicting that the number of refinancing applications will drop below the 40 percent mark. In 2012, they are expected to drop even further. The rising mortgage rates and shrinking number of qualified homeowners contribute to this drop.

3. Cash purchases of homes will be on the rise. In the last few months of 2010, cash purchases made up about 25 percent of existing home sales. Economists are predicting that number will increase in 2011, although it will probably not increase by much.

4. The demand for mortgages will drop. According to some sources, the demand for mortgages in 2011 will “decline to less than $1 trillion” because of slow economic growth and a drop in consumer confidence.

5. Getting a mortgage will still be slow and difficult. It’s difficult and time-consuming to get a mortgage today and analysts are predicting that will not change in 2011. It may take as long as 90 days to secure a mortgage and complete the entire process. Documentation and verification requirements will continue to make the process long and drawn out. But lenders and banks are being much more cautious about whom to give a loan to. If you plan on buying a home this year, start preparing your documents and other requirements today so you can get a headstart on the process.

These are just a few things to expect in general in 2011 for the mortgage industry. Of course, each individual case is different so you may or may not experience some of these things, such as the long mortgage process.

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