Don’t forget, it is your home.
Mortgage rates have steadily risen over the last few months, leading many potential homebuyers to pause their search. While it is understandable to be concerned about higher rates, this could actually be an opportunity to buy the home you’ve been searching for. Fewer buyers in the market could mean less competition for you when shopping for a home. Let’s look at what this means and how you can capitalize on this situation.
According to the Mortgage Bankers Association (MBA), mortgage applications declined by 13.3% in just one week due to rising mortgage rates. While rising rates are causing some potential buyers to step back from their search for a new home, those who stay the course will likely face less competition when looking for a house.
Silver Lining to Higher Rates
The current market has so few homes available that any reduction in competition can be a big benefit for buyers. Less competition means more bargaining power, as sellers may have fewer options for finding potential buyers who meet their criteria and have already been approved for a loan. As such, they may be more willing to negotiate on price or terms than before.
Furthermore, if you’re already pre-approved, moving forward with your purchase will become easier and faster since fewer offers will come through on each property listed.
One thing that all buyers should keep in mind is that if you’re looking for a certain type of loan (like an adjustable rate mortgage or ARM), it might not make sense anymore because these types of loans are directly affected by changes in interest rates. That said, fixed-rate mortgages remain attractive even with higher interest rates since their payments remain unchanged throughout the life of the loan, regardless of changes in interest rates over time.
What Does This Mean For You?
Rising mortgage rates don’t necessarily mean that you need to delay your plans to buy a home – there are opportunities here too! If you stay focused and opportunistic, you can negotiate with less competition while still getting favorable terms and prices due to current market conditions caused by rising interest rates and low inventory levels nationwide.
Knowing what type of loan is right for your circumstances is also key here; fixed-rate mortgages remain attractive even with higher interest rates, so they should definitely be considered when searching for financing options.
When done right, rising mortgage rates can result in an opportunity rather than an obstacle!
Even when you marry the home you can date the rate. If rates improve, refinance!
* Specific loan program availability and requirements vary. Please get in touch with me for more information.
Mortgage rates are higher, a lot higher than the beginning of this year. The question is, will they go lower? All signs point to “no.”
We are seeing the correction most of us expected but could not predict when. Today’s job numbers were far better than predicted. New jobs, 467,000 versus the predicted 150,000 were a surprise. November and December numbers were revised upwards by 709,000. This means pressure on wages, up 5.7%, FOR THE YEAR!
What does this mean for you? Any borrowed money tied to short term rates (home equity line of credit and credit card balances) will see higher rates right away. A new loan for an automobile or an installment debt from a big box store will certainly have higher rates going forward. Even with higher mortgage rates it may make sense to consider looking over all of your debt to see if there is a better strategy available to you.
Another factor, right now home equity is as strong as it has ever been. There is a good chance you have enough equity to revise your credit utilization to a tax-deductible mortgage loan and still receive the most favorable terms on a fixed rate loan.
Some advantages could be:
Rates have moved up. But rates are still low and a few months from now you may wish you had not waited.
To be clear, I always advise my clients to keep long term goals in mind. Free and clear home ownership in retirement is a goal for many. I can help with that.
You can email me a craig@craiggoebbel.com or if you want to move faster (rates are moving higher click on my picture on the right, it takes you to my secure, online application.
Shopping for a home loan can be daunting. What makes this process confusing is each lender will present their initial rate, closing costs and pre-paid items in different ways and typically in different places. Add to this the forms required by regulation (Lenders Estimate, LE, and Closing Disclosure, CD) and getting to the bottom line is even more daunting.
However, you can cut to the bottom line using the following guidelines by using the “Rule Of Same.” Here are the steps you need to follow:
Rule Of Same, Outside The Regulatory Box
The Lenders Estimate can be confusing. Ask for a Closing Cost Summary that includes every fee and charge for Closing Costs and Pre-Paid items using the following guidelines:
(at this point you are literally comparing apples to apples)
Once you have every Closing Cost Summary from the lenders shopped, go over the itemization of fees and pre-paid charges for each. After locating the pre-paid charges you need to deduct them from the total charges. These pre-paid items are:
Why does this work? Pre-paid charges are computed the same with every lender because they are based on the actual cost for each item, all third party charges.. Every escrow company computes pre-paid charges in the same way when closing your transaction, so these fees are the same for everyone. Other than the pre-paids, everything else is classified as a closing cost.
You may have read guidelines that say the APR is the best way to determine the best deal. Unfortunately, lenders have slight variations on how they compute APR so this calculation is not reliable.
The Rule Of Same will reliably get you to the best bottom line every time.
It’s Personal
Rates and fees are determined by your credit score, down payment, or equity, loan type and other factors so always seek a quote from a reliable source. Understand, all loan terms, including the available rate are subject to change without notice until all qualifying criteria for a specific loan transaction have been established and your loan is locked. Consult your lender for details.)
The question is, will they go lower? I don’t know, what makes you think you know?
Presently, it is the Corona virus scare that has ravaged the stock market and pushed long term yields as low as I have seen them for a very long time. Is a correction coming? It always does, sooner or later.
What does this mean for you? You can do nothing, this is always an option. You can call your trusted mortgage broker and see what is available for you and your circumstances.
Refinancing is a hassle. It can be if your financial house is chaotic and your routine documentation is helter-skelter, then getting things in order can be daunting. However, with a little work, often on your keyboard, you can have what a lender needs in short order. Does a little effort resulting in monthly mortgage savings, resulting in hundreds of dollars of monthly savings make sense? You tell me.
With home appreciation the last few years being steady, even amazing, you may have the opportunity to achieve the following:
Your only limit is your imagination!
Appraisal Waiver? Something else, an appraisal waiver (as in I don’t need one for your file) is far more common today than a year ago. With the necessary exhibits from you and an appraisal waiver I can close your refinance in 12 business days!
To be clear, I always advise my clients to think long term with the goal of a mortgage free home down the road. However, that does not mean we can’t take advantage of the opportunities afforded by home ownership along the way.
As of late Friday afternoon (2/28/2020) the U.S 10 Year Treasury Note closed at 1.156%. Since mortgage rates follow the 10 Year Treasury Note this means rates are not just low, they are very low. This drop has taken about a month to happen with most of the downward momentum driven by corona virus fears.
If you are heavily invested in the stock market it has been ugly for you. If you are paying on a mortgage with a rate above 4%, you should consider a refinance.
As the stock market goes, there is usually a correction. Be patient. As for mortgage rates, they tend to walk to a lower rate but run when they start to rise. Luck has more to do with catching the bottom than anything else. Catching the trend when it is at it’s lowest is the smart play.
Will rates go lower? No one knows. Is it smart to consider a refinance now? Maybe. Let me run your numbers and I will give you a detailed analysis of where you are now, what your goals are and if the numbers work in your favor. I just need a few facts about your current loan, I run the numbers and send them back to you.
I find it fascinating how the talking heads of all media treat everything as if it has already happened. Tax reform is not yet out the House, needs to clear the Senate then get signed into law. Based on what I have read, most taxpayers will see a reduction in their annual taxes. Some taxpayers in the higher brackets will experience a reduction in their deductions for home mortgage interest, property taxes and state income tax. However, current homeowners will see no change in their mortgage deduction status for any loan already in place. New homeowners will fall under the new rules. However, all of this is moot until a final bill is signed into law.
Here is the recap from the National Organization of Realtors:
Final Thought
I don’t see anything in the bill that would put a brake on housing based on our overall economy.
Update: As of 03/01/2020 all of the above still applies. Consult your mortgage broker or tax adviser to determine how current law applies to you, specifically.
Long term rates have risen and are predicted to rise a little further through next year. When long term treasury rates rise, so do mortgage rates. Speculation about a boost in economic growth, higher inflation rates and international trade wars are fueling this rise.
What does this mean for you? Nothing if you have locked in a rate below 4% for your home loan. If you are looking for a home or did not lock in a rate for your refinance, expect your interest rate to be higher than quotes you had a week ago.
Is this speculation premature? Perhaps, economists caution their forecasts are tentative. The marketplace does not like uncertainty so expect a bumpy ride until a clearer picture of a Trump administration and its policies are evident.
As for forecasts by economists, if you want four opinions about the economy, ask three economists.
On April 11th, 2011 I wrote about a sweet spot in our regional market. At the time the median price of a home was about 10% below what the median income of our region would dictate. My prediction was median home prices would rise as potential home buyer’s caught on to the bargain. I was right. Home values across the region started rising.
I believe we are at another sweet spot in our regional market due to a few things coming together.
First, interest rates are still incredibly low for FHA, VA and Conventional financing. Since this is an information piece and not a solicitation for a loan application, an The same is true for Jumbo loans. The bottom line, mortgage money is very cheap right now.*
Second, inventory is pretty good. There are many homes listed in the region with some area’s chock full of real bargains, listed at price points that will seem crazy three years from now.
Last, buyers are holding back and we are seeing price drops on listings. These price drops are not large, but they are drops. This makes it easier for you to negotiate things like seller paid closing costs.
Why are buyers reluctant?
I believe you can make a good argument for the consumers notion it is extremely difficult getting a mortgage loan. We all know the horror stories of incessant demands for documentation, documentation and more documentation? Ok, we get it. But seriously, it boils down to nailing down your current financial situation, analyzing what you can afford based on all of your information and then approving your loan. This is how things are today, by rules, regulation and frankly, sound lending practices. Many are jumping through the hoops and getting approved. Granted, you need to put your financial life on hold until the process is over but it is well worth it. You move yourself from renting to owning and paying off a mortgage with an interest rate at a historically low level while your housing asset predictably appreciates over the long haul.
What is the bottom line? We are in another sweet spot and now is a great time to buy a home! Should you worry about list prices dropping a little? Not at all. The fundamentals for the Puget Sound Region are very strong moving forward.
*Rates and fees are determined by your credit score, down payment, loan type and other factors so always seek a quote from a reliable source that includes an APR calculation. Understand, all loan terms, including the available rate and APR are subject to change without notice until all qualifying criteria for a specific loan transaction have been established. Consult your lender for details.
Yesterday, Freddie Mac released its market outlook for August. In short, the report focused on the economy getting back to a more normal state, with housing being driven by the fundamentals. What are the housing fundamentals that will drive this “more normal” economy?
What can this mean for housing? Pent up demand suddenly unleashed, coupled with a low inventory of resale and new construction listings would create another surge in home prices if rates stay in their current range. Only those at the top of the income levels would be the best candidates to actually purchase that first home.
Did you know you can be gifted the entire down payment for a mortgage loan? That is right and lending guidelines allow you to borrow up to 96.5% of the cost of purchasing and major remodeling of a beat up home. With as little as 3.5% of the total cost (which can be gifted) you can make an offer, purchase and have the money set aside for the remodel. Pretty cool, huh?
What about mortgage loans? Loan applications are down across the board. Every lender is scratching for loan closings. What does this mean for you? You can really negotiate a great deal. Contact me if you want to learn the five easy steps to shop for a loan.
CraigGoebbel - NMLS #139637 