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Monday, July 12, 2021

Mortgage Talk

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Now could be the perfect time to buy

If you’re still on the fence about whether this is a good time to think about your current or future mortgage, several local and national lenders are saying, “Yes.”

According to Market Watch, mortgage rates dropped to their lowest level since mid- February in a report issued July 8. The article said the decline was an indication of dwindling optimism among investors about the robustness of the recovery from the pandemic.

It reported the 30-year fixed-rate mortgage averaged 2.9% for the week ending July 8, a drop of eight basis points from the previous week. According to the report, the 30-year loan had risen to over 3% for the first time since April.

All this financial talk is above many current or would-be home owners' pay grades. While the low rates were attractive to home buyers who were treading the waters of a challenging market, a new survey from Fannie Mae released July 7 indicated Americans were growing more pessimistic about the prospect of buying a home now.

 

Meanwhile, Fannie Mae's chief economist told Market Watch that “mortgage rates remain not too far from their historical lows, and consumers are expressing even greater confidence about their household income and job situation compared to this time last year when the pandemic had shut down wide swaths of the economy.”

Locally, Ashley Brint, Regions mortgage vice president, told 318 Forum, “It is definitely more of a seller’s market right now due to low inventory. It is a wonderful time for step up buyers and renters to purchase a home while rates are still historically low.”

She added that mortgage rate experts like the Mortgage Bankers Association project that the low rates will continue.

Brandon Mitchell, a mortgage loan originator for Barksdale Federal Credit Union (BFCU), said, “Interest rates can change dayto-day, but long-term speculation indicates prospective borrowers could see these interest rates last for at least the next 18-24 months.”

Mitchell added that the market was still hotter than when the pandemic started, and home prices are on the rise. He said that means buyers could have the option of buying a more expensive home with a monthly payment not much higher. If you’re looking to buy, he said, “a buyer’s market depends on where you are looking to purchase.”

But, if you are like many Americans whose earnings declined during the shutdown, there is still hope, Mitchell said. If your loan was “paused” during the pandemic, “you will need to have made at least three (3) consecutive payments since coming off of deferment for your mortgage credit history to qualify.”

Speaking of qualifying, it’s often a scary prospect for most of us. Will the banker think I can repay the amount of money I need to borrow to buy a home? But lenders are in business to lend, and they’re willing to advise you about how to go about getting into your dream home.

“The first step is to contact your lender and let them know that you would like to get pre-qualified for a home loan,” according to Region’s Ashley Brint. “They will pull your credit and ask you a series of questions, such as your monthly income, how much money you have saved up, etc. These questions help to determine which loan program would best fit your specific need.”

According to BFCU’s Mitchell, “Apply for a mortgage loan to take the first step toward pre-qualifying for a mortgage loan. Review 60-day balances of your deposit accounts and investments for funds you will use to pay your down payment and for closing costs. Closing cost will generally range from 2%-5% of the mortgage loan amount, and it will vary from lender to lender.”

Some folks are interested in staying where they are, but those low mortgage interest rates seem too good to pass up. For them, refinancing their current loan might be the way to take advantage of the current climate.

Mitchell advised that "anytime the interest rates are 1.5%-2% points below the borrower’s current interest rate, it would be wise to explore the savings on interest, and perhaps even more so by considering a shorter term for the mortgage loan.”

Brint suggests contacting your lender if it would be beneficial to refinance. A lower rate, she said, could result in substantial savings and more money in your pocket over the life of the loan.

There are a veritable plethora of loans available to the interested borrower. Conventional, VA, FHA, USDA and Portfolio loans are offered by Regions, according to Brint. Mitchell said that Fannie Mae Conventional, FHA, VA and home equity products are available through BFCU.

They both suggest that your lender should be consulted to help you pick the right type of loan for your situation.

For conventional loans, Mitchell noted that there is usually a 3% down payment for first-time homebuyers. In other words, a $150,000 loan would require a down payment of $4,500. That doesn't include additional fees and expenses attached to buying a home, but your lender can fill you in on all the particulars when you sit down to sign. He said sellers like conventional loans because they usually close more quickly than governmentsponsored loans. He mentioned that keeping a good credit score is also very important with a conventional loan because a slipping rating can affect your payment.

FHA loans are generally more lenient with borrowers with less established credit histories, and mortgage insurance can be less expensive than for a conventional loan. An FHA loan can be a disadvantage down the road if you decide to convert to a conventional loan because it can add substantial cost to the process.

VA loans require no down payment, but you must be a veteran, and a funding fee may apply.

According to Mitchell, the home equity loan at BFCU offers no origination fees, no annual fees and no closing costs. He said they are popular with borrowers who want to finance home improvements, consolidate debts or plan for large expenses. The downside of the equity loans, he said, is that "paying for an appraisal could be required in some instances. Depending on the equity loan product, the interest rate may adjust quarterly if a fixed rate is not an available option.”

Looking ahead, Realtor.com chief economist Danielle Hale told Market Watch that rates are likely to bounce around 3% through August, at least. She said that was because the Federal Reserve was unlikely to set a definite timeline for winding down its stimulus efforts. Those efforts included the Fed purchasing mortgage-backed securities. She said that process has allowed mortgage rates to fall and remain near record lows.

Whether you’re looking for your first home, looking to move to a new home, or just want to borrow the money to fix up the one you’re in, local lenders are ready to advise you about how to make good choices when negotiating for a new mortgage.


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