This week’s Highlights:
- Have mortgage rates spiked sharply in the past 2 months?
- Fannie Mae’s economic forecast is lookin’ good!
- What no one tells you about mortgage pre-approvals
What’s with the increase in mortgage rates?
It has been reported that mortgage rates “rebounded sharply” since their all-time low in November. While it is true that the rate for a 30-year fixed rate mortgage rose to 2.79% last week, that’s only a 0.14% increase. We’d hardly call that a “sharp” increase! With the current rates, if you have 25% equity, you’re looking at a 2.75% and APR 2.8% with $2,600 in closing costs. Keep in mind Freddie & Fannie differentiate between new home purchase and a refinance, so refinancing will be 1/8th higher than the current mortgage rate.
The most important thing to remember is rates are just one piece of the puzzle. There will be different options for different people, based on your personal financial situation. Bottom line: Find a mortgage expert (ahem) who will help you determine the best combo of closing costs and rates that’s optimal for you.
Learn how to get the best rate for you with Accunet Mortgage and our team of refinance experts—click here to get started.
Fannie Mae data and predictions
Fannie Mae came out with their latest monthly forecast last Friday, and things are looking up. They predict a whopper of a rebound in gross domestic product with a predicted 5.3% increase. After the economy shrunk 2.7% as a direct result of the COVID-19 crisis, it’s nice to have some good news. Their 30-year fixed mortgage rate predictions are:
- Approx 2.7% for the beginning of the year
- Approx 2.8% to close out 2021
- Up to 2.9% in 2022
That’s a solid year of mortgage rates, if you ask us!
What does Fannie’s prediction mean for different types of loans?
We had a client reach out to us about the opportunity for 67% of Americans with outstanding loans to save 0.5%. They were interested in cashing in, if they could, so we dove deeper and found three different options for them:
- Door #1: If we go with a 30-year fixed, we can lower their monthly payment by $187. This saves them a total of $42,000 in interest over the lives of their loan.
- Door #2: If they take a 27-year loan, they’ll save $79 per month. This will help them build equity and still reduce their monthly expenses.
- Door #3: If they don’t need their monthly payment to go down at all, they can get a 25-year fixed, and they would save $73,000 total interest.
There is no right answer here. The point of this is to further show how many options there are in the mortgage world. Let your priorities influence what you choose!
Learn more about the rules of refinance with Accunet’s refi rules of thumb.
What you need to know about mortgage pre-approvals
Don’t wait until the day you’re writing your first offer to request a pre-approved mortgage. That’s it. That’s the tip. Allow us to elaborate.
Real Client Experience
One of our clients did just this and lucky for them, we’re experts who are great at what we do, so we were able to pull through in the end. HOWEVER, it’s important to keep in mind that it’s not always as simple as that.
When you go through the approval process, all the banks need to do is check your credit and take your word about whether or not you can afford the home. We noticed when our client uploaded their W2 and pay stubs that the wife was on medical leave. Mortgage lenders are not legally able to ask about a person’s medical history, so if you are on medical or parental leave, you must tell your lender.
Why is it your lender’s business? Because when you’re getting approved, you are required to use your current income, not the income you will get when you return to work. The borrower also must prove that they intend to return to work (i.e. written statement from your employer with return date). Your lender will learn this information in the approval process whether you tell them or not, so save yourself (and your mortgage experts) the scrambling and make sure you tell them upfront. If you do, you’ll be on your way to a rock-solid pre-approval in no time!
Buying a new home? Start here so you know what to expect from the process!