Refinance applications jumped during the first week of 2008, according to a recent weekly survey from the Mortgage Bankers Association. The catalyst was lower interest rates on 30-year fixed-rate mortgages that hovered below 6 percent on average at the end of the first week in January, and rates have fallen further since then.

During the recent years of record home buying, most buyers opted for adjustable-rate mortgages (ARMs) rather than fixed-rate financing. The most popular mortgage vehicle was the fixed ARM with an interest rate that was initially fixed at a below-market interest rate for three or five years. At the end of this time, the interest rate resets to a new rate, and the loan converts to an ARM with an interest rate and monthly payment that fluctuate over time.

A record number of these fixed-ARM mortgages are due for resets this year. It’s anticipated that 2008 will be a big year for refinancing.

HOUSE HUNTING TIP: Even though you may be counting on interest rates dropping further, don’t wait until the last minute to start the refinancing process. The credit crisis that began in August 2007 has impacted the entire mortgage industry, not just the purchase mortgage part of the business. This means that it may be more difficult for you to refinance now than it was the last time.

Many home buyers who bought during the hot markets of recent years qualified for financing by using a stated-income mortgage. Lenders didn’t require borrowers to verify their income by providing tax returns or employment verification in order to qualify for a loan. Some buyers, or their mortgage brokers, overstated income so the loan would be approved.

Those days are over. Stated-income mortgages are a dying breed and those that are available won’t work for most refinancers. For example, Washington Mutual offers a stated-income mortgage, but only in amounts up to 50 percent of the value of the property.

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