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The old maxim “buy low, sell high” is not just a Wall Street mantra. It is actually the aim of every homeowner in Washington state and throughout the U.S.
Unless substantially wealthy, most homeowners pay more than the sales price. They also pay for the money borrowed to afford the sales price. The cost of borrowing is called interest, and it can add up over time.
This is why many people refinance when interest rates fall, to save themselves from paying more than necessary. It is a pattern repeated again and again, and it has been happening in Washington State for a while. But what is the current mortgage interest rate and activity level of mortgage refinancing in WA State?
After months of keeping rates at near-zero, the Federal Reserve recently announced its first interest rate increase since 2018. Since then, the central bank has already hiked rates, and it’s expected that it will increased it a few more times throughout 2022.
Since early 2021, mortgage interest rates have been inching up. By April 2022, the 30-year fixed product hovers around 5.11% in Washington State.
This may still an attractive figure for those property owners who purchased their homes with a mortgage priced at 5.375 and borrowed, say $300,000. A reduced interest rate represents a lot of money per month back in the borrower’s pocket.
But borrowers who locked in at a lower rate might have little incentive to refinance today. Unless they can secure a rate at least 1% lower than what they’re currently paying, it might not make much sense for some borrowers to refinance.
As of the week of April 20, 2022, the Mortgage Bankers Association (MBA) reports that the volume of refinancing applications across America decreased by 8% from the previous week, and by 68% from the same time last year.
According to real estate research firm Zillow, the average price of a single-family residence went up by 23.2% in King County over the past 12 months, and in Washington State, prices increased 24.4% over the same time period. The average home in the Evergreen State is now $606,643.
This is significant not only to those selling their homes. Homeowners will find additional incentives to refinance as their loan-to-value (LTV) ratios change in their favor because they have just obtained additional equity in the property.
They may even opt for a cash-out option in order to make improvements to the property or to consolidate debt. Although it may be too soon to tell how Evergreen State application numbers compared to other states, the rise in values can doubtless jack them up. What are the sales prices in your neighborhood?
Nearly 50 years ago, Freddie Mac, Federal Home Loan Mortgage Corporation, started surveying a wide range of lenders to look for trends in mortgage rates. During the 1970s, inflation rates were high and getting higher, peaking at an annual rate of almost 10 percent in 1981. This left mortgage rates hovering between 18 and 19 percent for a conventional 30-year fixed-rate loan.
As of the week of April 24, 2022, the mortgage rate for a 30-year fixed-rate mortgage is at 5.11%. This is higher than it was at the start of 2022, and quite a bit higher than it was in January 2021 when rates hit rock bottom at 2.65%.
That said, rate are still relatively low compared to years past, especially in the 1980s when rates were as high as 18%.
Washington, like most states, recognizes finance and credit activity to be an essential service. Therefore, banks, brokers and correspondent lenders continue to originate, process, underwrite and close mortgage loans. Many institutions have reduced their workforces or otherwise enabled more personnel to do their jobs from home.
As the weeks pass, the lenders grow more efficient under these new business arrangements. Yet the question remains whether they can absorb a large increase in applications under this regime. Technology, of course, aids in this effort immensely.
For tech-savvy mortgage lenders, online applications are the norm. In most cases, applicants receive a prequalification based on a single submission. Getting approval requires documents to backstop the representations on the loan application. If prospective borrowers have access to a scanner, even hard copy papers can be uploaded to the lender’s online portal.
Appraisals are also formatted for electronic transmission. Once everything is received, the assigned underwriter can evaluate the application. A conventional, owner-occupied refinance that does not exceed a conforming loan amount is frequently underwritten with an automated program. Yet even unorthodox loans can be reviewed remotely if necessary.
Appraisers are taking care to maintain health and safety during the pandemic. Fortunately, many refinances are approved with property inspection waivers or drive-by valuations. Furthermore, federally-chartered investors like FannieMae and FreddieMac are highlighting their expanded acceptance of drive-by appraisals for refinances.
Closings are made possible through Washington’s Uniform Electronic Transactions Act (UETA) and acceptance of e-notarizations. This allows settlement agents to close loans without gathering a crowd in the office. Recording offices in counties may accept all such documentation provided they are technologically equipped to receive electronic forms.
As noted above, refinancing makes sense if you can secure a rate of at least 1% lower than what you’re currently paying. Further, if the value of your home is significantly higher than it was when you bought it, this could be a good opportunity for a cash-out refinance, especially if you have a large expense to cover.
A lender with both competence and ethics knows that each homeowner maintains different financial interests from others. Even under optimal conditions, refinancing now may or may not be the best course of action for everyone.
Discussing the matter with a seasoned mortgage professional can assist in clarifying the benefits and side-effects of property refinance at this juncture in economic history. He or she can explain the fees charged and conditions to be satisfied when applying for and receiving a new loan. Do not apply with questions outstanding. Talk to a knowledgeable loan officer first.
Sammamish Mortgage has been around since 1992 and has helped plenty of homeowners in the Pacific Northwest. If you are looking for mortgage financing in Washington, Sammamish Mortgage can help. We have a variety of mortgage programs in Washington, Oregon, Colorado, and Idaho. If you have any finance or mortgage-related questions, you can contact us. You can also View Rates directly on our site or even Apply Instantly or get an Instant Rate Quote.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.