Mortgage interest rates have seen record lows several times over the past few months. Home owners should refinance if the savings are significant and their financial affairs remain intact.
A generation ago, few could even imagine mortgage rates as low as exist today. Even before the COVID-19 pandemic, interest rates were extremely attractive. After intervention by the Federal Reserve Board of Governors, they are sinking lower.
With all of the potential savings this decline can promise, mortgagees in Washington, Oregon, Colorado and Idaho wonder whether they can make their loans a little less pricey by refinancing.
For sure, monthly remittances will be cheaper, but by how much? Are the savings sufficient to justify the cost of a refinance? Weighing the saved money per month against the fees and charges associated with a new loan is but one indicator in the refinance decision.
The precautions related to slowing the coronavirus ground the national economy nearly to a halt. Businesses of all kinds and sizes have laid off multitudes of employees, some closing operations altogether. Unemployment rolls were swollen by the millions, supply lines were interrupted and the government promised income checks to hordes of displaced workers.
The situation has thankfully improved since the early weeks and months of the pandemic, and the economy is slowly ramping back up.
To keep businesses viable, the leadership of the Federal Reserve sought to make borrowed money less costly by lowering its benchmark interest rate, under which financial institutions lend to each other, effectively to zero percent. While the Fed lowering their Fed Funds Rate to zero doesn’t directly impact mortgage rates, other stimulus the Fed is providing does have a direct impact. This includes the purchasing of Mortgage Backed Securities.
The Fed recently purchased billions of dollars of Mortgage Backed Securities which has helped push mortgage rates to record lows. While it’s impossible to know for sure what rates will do moving forward, there are signs that low rates are here for the foreseeable future.
Huge government debt, an economy in the midst of a recession and possibly worse, along with minimal inflationary pressures is a perfect combination to keeping long-duration rates low.
Should you refinance now or wait? Timing the market is difficult but if you can save money on interest with little to no closing costs there is little downside to refinancing. If rates continue to drop in the future you can always look to refinance again down the road.
Washington State is considered one of the hottest markets in the entire country. Demand is skyrocketing, and the current supply cannot keep up.
This has helped contribute to soaring home prices over the past year. The current average home price in Washington State is $478,015, marking a whopping 13.3% increase in prices year-over-year.
Like Washington State, Colorado is also seeing a sizzling real estate market. Despite COVID-19, housing markets across Colorado – especially in places like Denver – are extremely hot right now. The housing inventory just cannot keep up with demand in this state. The market is certainly a very competitive one.,
For instance, in Denver, homes are selling in as little as 7 days after being listed. Prices in the city have risen 7.8% over the past year and now sit at $505,516. While the pandemic has had an impact on the local economy, it appears as though buyers are continuing to want to into the market in centers across Colorado.
The state government issued guidelines relative to real estate operations and mortgage banking. In the meantime, the housing market across the state of Oregon is very healthy.
The year 2020 may have been a good time for buyers given the lull in the real estate market as a result of the COVID-19 pandemic. But things are picking up in 2021. That said, this year is still a good time to get into the market, though it may be best to get in sooner rather than later in order to buy before home prices continue to soar.
As of early spring, home prices in Oregon are $409,182, which is 10.9% higher than where they were last year at the same time.
Business observers see no decline in the enthusiasm for refinancing on the part of homeowners, despite the continued health crisis. Lenders are fully equipped to originate and approve loans online.
With restrictions on appraisals and a general increase in applications, getting to settlement may take somewhat longer than usual. Still, title companies are still conducting closings, keeping non-signers off the premises and confining signers to completely sanitized meeting rooms. In some places, drive-up settlements are possible. In short, it can happen with patience.
With the knowledge that mortgage refinance is relatively safe, both legally and biologically, prospective borrowers must examine their individual circumstances as to whether replacing the current mortgage is a wise decision. Certain financial and legal issues are worthy of consideration.
While one should never say never, temporary layoffs due to COVID-19 make it difficult for lenders to obtain employment verifications. If the business is shuttered, this is virtually impossible. If the workforce is downsized, and the prospect of return is assured, a lender might be flexible regarding income and employment.
Working in a sidelined applicant’s favor is that federal investors like Fannie Mae and Freddie Mac have loosened some of their standards during the pandemic. This frees the lenders to do likewise, especially if all other credit touchstones are in good shape.
Although this is no guarantee of approval, it does demonstrate that lenders are willing to cut loan candidates some slack in the face of extraordinary times. Under ordinary conditions, no regular income means no mortgage forthcoming in most cases.
Even before the Fed’s aggressive move on rates, they were already relatively low. Will any potential savings make up for the costs associated with applying for and closing another home loan? How long you stay in your house can help determine when you break even and begin to save.
The ideal answers should be yes, yes and no. If so, fire away. One more consideration: now is the time to switch to fixed-rate if your current mortgage is adjustable. Low rates are not a perpetual guarantee.
Especially for the temporarily unemployed, good credit becomes all the more important for gaining the confidence of underwriters. If, since the last mortgage closed, a borrower has taken on a larger volume of consumer debt, it may show up in the FICO score and will definitely affect the debt-to-income ratio so important when evaluating applications.
Despite the attractiveness of the new rates, prospects should review their credit report with a loan officer. While lenders are making accommodations due to COVID-19, they can not let everything slide.
Along the same lines, if a borrower has incurred liens or judgments that are attached to the property since closing on the current mortgage, a lender will condition the refinance on paying those off or, alternatively, getting them discharged.
Depending on the size of these claims, it might make sense to delay refinancing until these matters are settled once and for all. The title company can not issue a clean policy to the lender as long as a lien or judgment stays in place. Furthermore, they may not appear on the credit report, showing up only on the title report.
In deciding whether or not to refinance, potential applicants do well to discuss their situation with a mortgage professional. This expert knows from experience when refinancing makes sense…and when it does not.
Sammamish Mortgage has been around since 1992, and we’d love to help you with our expertise. Based in the Pacific Northwest, Sammamish offers high quality mortgage loan programs in Colorado, Oregon, Idaho, and Washington.
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