If you want to shoot down a good rate, your gun has to be loaded!!

As rates remain stable, you are going to want to grab a good rate if mortgage rates dip in early January 2011. To lock in that rate, you need to be ready to move. You need to have your credit pulled, your documents ready, and your application completed.

After reaching historical lows, rates have risen rapidly since November. We have received a small reprieve, but what will rates look like in January. I believe that rates will not go down significantly unless there is a good reason to drive them down. This could take the form of the Federal Reserve Bank stepping in to lower rates in the mortgage-backed securities .market, the way most mortgages are funded, and thereby lowering rates for mortgages.

But the Fed has not explained its plan to cut rates for mortgages, and has given little indication how its Quantitative Easing program will work (a fancy term that describes the Fed buying long term treasuries to pull down treasury rates and  the rates on mortgage-backed securities and mortgages). So there is no good reason rates would go down. That being said, there is no real reason why rates should climb.

Although economic growth and production data continues to slowly improve, the economy has not created a significant number of jobs and the real estate markets have yet to bounce back. The  Administration and the Fed are intent on boosting job growth and stimulating the real estate markets.

As described above, the Fed is not willing and/or able to outline its plan on reducing rates, therefore creating no incentive for rates to drop. Likewise, the Administration and Congress are unlikely to develop any concrete strategy to repair the economy in the near term. This should keep rates from rising due to inflation concerns (If inflation is a concern, investors want a higher rate to compensate them for the expected rise in inflation).

So rates should stay about he same going forward….for the most part. The only real wild card is that rates rose drastically in part because we entered the holiday the season and banks became very conservative with their rate offerings. Now that we are about to enter 2011 and there is a chance (not a guarantee), that rates will dip in the beginning of 2011 as the markets come back to full strength and banks become more aggressive for loan growth in the new year.

But how do you make sure that you can grab that rate? Even if you can keep track of the markets, how can you make sure that you can lock the low rate when it happens. Because even if you can make a call to your banker to lock the low rate, how can you make sure that you get that rate at closing.

To make sure that you receive the rate that you were promised, it is best if your banker has the following information before you lock the loan:

• Full credit report;
• W-2s, tax returns, pay stubs, bank statements and any other information to verify your income and assets; and
• Completed and signed loan application.

Not all rate locks are created equally. By having as much information as possible handed into your banker, there will be fewer chances that circumstances under which you received the lock will change.  This means no rate changes due to surprises!!!! Also, by having in as much information in as possible, you can have your loan locked for 25-30 days instead of 40-45 days, and this will save you 0.125% on your rate. Similarly, if you are ready to go with your application, there is less chance that your rate lock will break because of time wasted putting it the information and application together. If your lock breaks, it could cost you 0.125%-0.250% on your rate!!

Bottom line: If you plan to refinance your mortgage or buy a new home in early 2011, you have the best bet of getting your rate if you have completed the loan application process and are prepared to grab that good rate when it comes. Your gun has to be loaded to shoot down that great rate!!!!