After buying a home, you may feel as if you've completed a marathon and are due for a little downtime to settle in and rest. But don't sit too long; there's still plenty to do.
We recommend prioritizing the many must-dos that will ensure your safety and comfort in your new Spokane home. Here are five things to get started on.
In July, the average 30-year fixed-rate mortgage fell below 3% for the first time in history.1 And while many have rushed to take advantage of this unprecedented opportunity, others question the hype. Are today's rates truly a bargain?
While average mortgage rates have drifted between 4% and 5% in recent years, they haven't always been so low. Freddie Mac began tracking 30-year mortgage rates in 1971. At that time, the national average was 7.31%.2 As the rate of inflation started to rise in the mid-1970s, mortgage rates surged. It's hard to imagine now, but the average U.S. mortgage rate reached a high of 18.63% in 1981.3
Fortunately for home buyers, inflation normalized by October 1982, which sent mortgage rates on a downward trajectory that would bring them as low as 3.31% in 2012.3 Since 2012, 30-year fixed rates have risen modestly, with the daily average climbing as high as 4.94% in 2018.4
So what's causing today's rates to sink to unprecedented lows? Economic uncertainty.
Mortgage rates generally follow bond yields, because the majority of U.S. mortgages are packaged together and sold as bonds. As the coronavirus pandemic continues to dampen the economy and inject volatility into the stock market, a growing number of investors are shifting their money into low-risk bonds. Increased demand has driven bond yields—and mortgage rates—down.5
However, according to National Association of Realtors Chief Economist Lawrence Yun, "the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities." According to Yun, "we will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed's stance."6
How do low mortgage rates benefit current homeowners?
Low mortgage rates increase buyer demand, which is good news for sellers. But what if you don't have any plans to sell your home? Can current homeowners benefit from falling mortgage rates? Yes, they can!
A growing number of homeowners are capitalizing on today's rock-bottom rates by refinancing their existing mortgages. In fact, refinance applications have surged over the past few months—and for a good reason.7 Reduced interest rates can save homeowners a bundle on both monthly payments and total payments over the lifetime of a mortgage.
The chart below illustrates the potential savings when you decrease your mortgage rate by just one percentage point. When it comes to refinancing, the bigger the spread, the greater the savings.
Estimated Monthly Payment On a 30-Year Fixed-Rate Mortgage
Be sure to factor in any prepayment penalties on your current mortgage and closing costs for your new mortgage. For a refinance, expect to pay between 2% to 5% of your loan amount.8 You can divide your closing costs by your monthly savings to find out how long it will take to recoup your investment, or use an online refinance calculator. For a more precise calculation of your potential savings, we'd be happy to connect you with a mortgage professional in our network who can help you decide if refinancing is a good option for you.
How do low mortgage rates benefit home buyers?
We've already shown how low rates can save you money on your mortgage payments. But they can also give a boost to your budget by increasing your purchasing power. For example, imagine you have a budget of $1,500 to put toward your monthly mortgage payment. If you take out a 30-year mortgage at 5.0%, you can afford a loan of $279,000.
Now let's assume the mortgage rate falls to 4.0%. At that rate, you can afford to borrow $314,000 while still keeping the same $1,500 monthly payment. That's a budget increase of $35,000!
If the rate falls even further to 3.0%, you can afford to borrow $355,000 and still pay the same $1,500 each month. That's $76,000 over your original budget! All because the interest rate fell by two percentage points. If you've been priced out of the market before, today's low rates may put you in a better position to afford your dream home.
On the other hand, rising mortgages rates will erode your purchasing power. Wait to buy, and you may have to settle for a smaller home in a less-desirable neighborhood. So if you're planning to move, don't miss out on the phenomenal discount you can get with today's historically-low rates.
How low could mortgage rates go?
No one can say with certainty how low mortgage rates will fall or when they will rise again. A lot will depend on the trajectory of the pandemic and subsequent economic impact.
Forecasters at Freddie Mac and the Mortgage Bankers Association predict 30-year mortgage rates will average 3.2% and 3.5% respectively in 2021.9,10 However, economists at Fannie Mae expect them to dip even lower to an average of 2.8% next year.11
Still, many experts agree that those who wait to take advantage of these unprecedented rates could miss out on the deal of a lifetime. It's hard to imagine that rates may drop even lower. Positive news about a vaccine or a faster-than-expected economic recovery could send rates back up to pre-pandemic levels.
How can I secure the best available mortgage rate?
While the average 30-year mortgage rate is hovering around 3%, you can do a quick search online and find advertised rates that are even lower. But these ultra-low mortgages are typically reserved for only prime borrowers. So what steps can you take to secure the lowest possible rate?
1. Consider a 15-Year Mortgage Term
Lock in a low rate by opting for a 15-year mortgage. If you can afford the higher monthly payment, a shorter mortgage term can save you a bundle in interest, and you'll pay off your home in half the time.12
2. Give Your Credit Score a Boost
The economic downturn has made lenders more cautious. These days, you'll probably need a credit score of at least 740 to secure their lowest rates.13 While there's no fast fix for bad credit, you can take steps to help your score before you apply for a loan:14
● Dispute inaccuracies on your credit report.
● Pay your bills on time, and catch up on any missed payments.
● Hold off on applying for new credit.
● Pay off debt, and keep balances low on your credit cards.
● Don't close unused credit cards (unless they're charging you an annual fee).
3. Make a Large Down Payment
The more equity you have in a home, the less likely you are to default on your mortgage. That's why lenders offer better rates to borrowers who make a sizable down payment. Plus, if you put down at least 20%, you can avoid paying for private mortgage insurance.
4. Pay for Points
Discount points are fees paid to the mortgage company in exchange for a lower interest rate. At a cost of 1% of the loan amount, they aren't cheap. But the investment can pay off over the long-term in interest savings.
5. Shop Around
Rates, terms, and fees can vary widely amongst mortgage providers, so do your homework. Contact several lenders to find out which one is willing to offer you the best overall deal. But be sure to complete the process within 45 days—or else the credit inquiries by multiple mortgage companies could have a negative impact on your credit score.16
Ready to take advantage of the lowest mortgage rates in history?
Mortgage rates have never been this low. Don't miss out on your chance to lock in a great rate on a new home or refinance your existing mortgage. Either way, we can help.
We'd be happy to connect you with the most trusted mortgage professionals in our network. And if you're ready to start shopping for a new home, we'd love to assist you with your search—all at no cost to you! Contact us today to schedule a free consultation.
This article is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.
This is a guest post by Tony Jones, Sales Manager & Senior Mortgage Specialist with Directors Mortgage. You can contact him at (509) 220-0259, or email@example.com. Please note, this information is accurate as of this article's posting time. The situation is very dynamic and is subject to change.
I hope you and your family are doing well during these times. Please be assured that Directors Mortgage has adapted to the the changes, and that my team and I are still here to help you.
Recently, several clients have asked about the news they are hearing - mortgage assistance may allow them to "skip" monthly payments if they are in a tough financial spot due to COVID-19. If you are wondering the same, in short, relief may be available. I strongly recommend you to consider all of your options, and you'll want to protect your credit and long term financial goals.
This is the main one the that the news media has been talking about with the CARES Act which pertains to Conventional, FHA, VA & USDA loan types. It is an agreement with your lender to reduce or delay regular payments for a set time. When the forbearance period ends, the postponed payments will be due all at once. It is important to know that you will not be able to refinance until you are at least one year out of forbearance.
This plan allow you to postpone your payments for a set time then pay them at the end of your regular loan term. "Deferment" and "forbearance" are often used interchangeably, but they are different. A deferment is more beneficial for many because it eliminates the need to make up multiple payments at the end of a short postponement period. Deferments are not available from all servicers.
This is an arrangement that allows you to make up your postponed payments at the end of a forbearance period by spreading the cost over a period of time. Payment Assistance Programs are not available from all servicers.
This is a legal process that alters the terms of your loan. For instance, a modification could lower your monthly payments by lengthening your loan term.
To set up the options listed above, please reach out using the contact information on your monthly loan statement. Document all calls and agreements, then check your monthly statements and credit reports to assure that the changes are reported correctly.
If you still have enough income to qualify, accessing the equity in your home by refinancing or obtaining a secured credit line may be a good option for lowering your payments, consolidating other debts, and/or creating a cash cushion. A refi will be especially beneficial if current rates are lower than those on your existing financing.
I hope this helps you understand the available options out there. If you have any questions, please reach out - I would be happy to help!
Moving to a new city or relocating within your current community is exciting. But there are also many factors to consider to ensure that you land in the right neighborhood. When you're shopping for Spokane homes for sale, learning about neighborhoods will help you find a home that you'll love. Our REALTORS® are here to help you find the perfect neighborhood, with our guide for how to pick a Spokane neighborhood to buy your next home.
If you've come here to learn about picking a neighborhood, you're already off to a great start! Online research is crucial for getting an idea of what's out there and identifying which neighborhoods fit your needs. With a general idea of target neighborhoods, you'll be ready to get down to business.
Whether you're familiar with Spokane or you're brand new to the area, picking the right real estate agent will make your move much easier. An experienced, local real estate agent will have an in-depth knowledge of your target neighborhoods in the city and can help you choose the right option.
How long are you willing to commute for work, and are you planning to take public transportation? The Spokane Transit Authority offers bus routes throughout the city, so you can choose public transit or commute on your own. If you're looking to live close to the city's major areas, then Spokane Valley homes for sale are a great option. Many of Spokane's neighborhoods are very walkable as well, allowing you to explore all that your neighborhood has to offer without ever getting behind the wheel.
Of course, your commute isn't just about getting to work each day. You'll also want to plan on what you'll do for fun close to home. If you want to be close to the action in Spokane, then consider Millwood homes for sale. You'll never be far from fun attractions, and will have all of the services you need close to home.
If you have kids or are planning to start a family in your next home, be sure to consider local schools. The quality of local schools can also have an impact on home prices. Even if you don't have kids, it doesn't hurt to learn about schools.
While you can learn plenty from online research and speaking with your real estate agent, there's no substitute for seeing neighborhoods first-hand. Once you have a list of promising candidates, get out there, start exploring, and find the neighborhood that works for you.
Finding the best neighborhood fit is easier with the right real estate team on your side, and we'd love to help you find your next home. Contact us to buy and sell homes throughout the Spokane, WA, area.