Mortgage Rates are Down: Strike while the Iron is HOT!

Yes. You heard it right! Mortgage rates are down and will likely to drop even more. But what’s in it for you?

Real Estate IQ, the No. 1 in Deal Finding, walks you through the ins and outs of the mortgage hype within the real estate industry and explains why it is important to take advantage while it lasts till the remainder of 2020. 

Mortgage interest rates have been following a downward trend—even before the pandemic started. In May, the average interest rate for a conventional 15-year fixed-rate mortgage (the cheapest type of mortgage available) dropped to 2.69%—the lowest it’s been in over seven years. Economists are predicting that interest rates will continue to stay low until the economy is close to normal again. But interest rates probably won’t go so low as to hit rock bottom since lenders still have high demand from current homeowners to refinance their mortgages at lower rates.

Mortgage rates have been on a roller coaster ride, juggling experts and consumers alike. Freed by normal market levers,rates have risen and fallen on a seemingly unpredictable pattern. In retrospect, the reasons are more prevalent.

When the COVID-19 crisis landed in the United States, the Federal Reserve slashed interest rates to record lows. With rates touching new record lows, a bottleneck has become evident, and lenders had to raise rates to stave off more business from people who wanted to refinance or lock in a purchase loan. 

REFINANCING your mortgage

For mortgage borrowers, lower interest rates will lead to an opportune time for refinancing. A lower interest rate can easily save tens of thousands of dollars over the life of a 15-, 20-, or 30-year loan. A lot of lenders are enduring heavy workloads while plenty of homeowners are starting to refinance these days. According to CNBC, some lenders are offering rates as low as 2.75% for a 30-year mortgage.

Ask yourself why you are refinancing so you can get the right loan. May it be to get a lower monthly payment, to shorten the loan term, replace your adjustable-rate mortgage with a low fixed-rate loan, to borrow more than you owe in a cash-out refinance or to get rid of FHA mortgage insurance, you need to know the right reason to come up with the right decision.

Canvass and solicit from more than one lender. You’re more likely to land the best possible deal if you apply with multiple lenders. Each lender will give you a disclosure document called a Loan Estimate. By comparing Loan Estimates you have available, you’ll be able to identify the best offer. Listen to your loan officer’s advice about locking your rate. In normal times, you can lock in a rate when you apply. But with the market in turmoil, some lenders won’t let you lock until later in the underwriting process. With record low rates, you could save thousands, or tens of thousands, by locking in a lower rate.

If you want to refinance or get a smart mortgage that helps you pay off your home fast, talk to our friends at REIQ Funding.

In the last few weeks, rates have continued to fall. With excellent credit, it’s now possible to get rates well below 3%. If your credit or income have stayed the same or improved since you signed your mortgage papers, it could really be the perfect time to refinance. 

Seller’s Perspective

If interest rates stay low, buyers will be more motivated to buy your home sooner than later. But if interest rates start increasing in the latter part of the year, it will be recommended to just plan for your house to be on the market a little longer. A mortgage is a big commitment, and adding higher interest rates to the mix will make many buyers pause a while.

An experienced real estate agent can help you set the right expectations on how much money to sell your house for and how long you’ll have to wait for the best offer.

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Buyer’s Perspective

Even though interest rates are super low, be smart and go for a conventional 15-year fixed-rate mortgage unless you can buy and pay in cash. Avoid getting locked into paying the extra interest and fees that come with rip-off mortgages like FHA, VA, USDA and adjustable-rate ones. In this way, you’ll know exactly what your payment will be over the life of the loan and you’ll pay it off faster than expected.

Buying a home

If you’re in the market to buy a home, you have fewer homes to choose from than you had just a few weeks ago. New listings declined 15% at the end of March — at the time of year when listings typically rise, according to Black Knight, a real estate data company.

Both mortgage rates and affordability are surprisingly not the biggest hurdles in today’s housing market. Apparently, there is a serious lack of affordable homes for sale. That is where the problem starts. Lower mortgage rates can only do so much to stimulate home sales while fewer homes are available on the market.

Get a mortgage pre-approval. A pre-approval letter gives sellers the confidence that you’ll be able to get a loan and that the sale will go through.Let the seller know that you can be flexible about the closing date if that’s possible.

In response, the Federal Reserve has employed quantitative easing, or QE, by injecting billions into the MBS market, to ensure that mortgage rates stay low. Experts say this move will help put mortgage rates back into balance, helping to push them into the low 3 percent range during the second half  of 2020.

Despite the efforts put in place to ensure the continuation of economic activity and market liquidity, mortgage rates are likely to reach new lows in the coming weeks and months. The recent stress put on the financial system led to a bump on the road in terms of rates in recent weeks, but the rates should drift down again. Heightened uncertainty is causing a large variance in mortgage rates forecast through 2021, though many expect the rates on 30-year fixed-rate mortgages to hover around 3 percent or fall lower. With this information delivered to our doorsteps, it is very curious to think that maybe, it is really wise to strike now while the iron is hot. 

Sources: Federal Reserve 

Data information from https://www.bankrate.com/, https://www.nerdwallet.com/ and http://www.forbes.com

 Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.

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