Mortgage Monday with Matthew: Election, Economy & Escalating Interest Rates

The number one question I’m getting these days is what is going on with interest rates?  To say for certain would require a crystal ball, but I can provide some information about how the election and changes in the economy could alter their trajectory.

Historically low interest rates lead to an influx of refinances and purchases in 2016.  People were cashing in on refi savings and enjoying their increased buying power.  Then, immediately after the presidential election on November 9th, interest rates took a sharp turn for the worse.  Yields on the 10-year treasury experienced their largest two-week increase since November 2001.  These changes were driven by rising inflation expectations and the market’s near-certainty that the Federal Reserve will raise interest rates in December.

With news of rising rates, it’s easy to forget that interest rates are still at historical lows and your purchasing power is greater now than at nearly any time in the last 45 years.  Even with the increases we have already seen, interest rates on a national level are basically the same as they were last year at this time.  And remember that during the boom, rates were in the 6’s.  However, experts are indicating that this latest rise might be a new floor, as opposed to a reactionary spike, as many people were hoping.

So what does all this mean?  Regarding real estate, it’s probably best to plan for slightly rising rates in the short term.  The expected movement in interest rates shouldn’t price buyers out of the market, but rather marginally increase their proposed monthly payments.  For sellers, be aware that steadily increasing interest rates may lead to a reduction in appreciation rates and home prices could slow.  Whether you are looking to buy or sell, it is critical to understand what is happening in the market to put yourself in the best possible situation.

 

Matthew Goldberg | Loan Officer | Primary Residential Mortgage Inc. 

P: 480-787-2233 | mgoldberg@primeres.com | NMLS # 1342195 | AZ LO-0930826

9280 S Kyrene Rd #134 |Tempe, Arizona 85284 | NMLS # 3094 | MB-0902614

Thinking about buying soon? Make sure your credit is in order!

There’s no more important time to work on your credit score than when you’re about to apply for a mortgage. Improving your credit can save you a ton of money—we’re talking about thousands of dollars over the life of the loan. Here are the actions you can take that will have a notable impact on your score.

Pay down your credit card balances
Credit utilization is one of the biggest factors in determining your credit score. Your credit utilization should at least be less than 30 percent of your limit, and it’s even better if you can get it below 15 percent. This rule applies to both individual cards and your overall credit limit.

It may even be worthwhile to use some of the cash funds you were planning to use for a down payment to pay off credit card balances. You can chat with a lender to find out if it would be beneficial for your specific situation.

Do no harm
While you certainly want to improve your score if possible, at the very least you’ll want to keep it steady. Avoid opening new lines of credit if you’re applying for a mortgage in the very near future. This will cause a hard inquiry to show up on your credit report.

Continue this while under contract, buying a houseful of furniture before you close can cause you to no longer qualify for your loan!

Take care of negative items
It’s good practice to check your credit report for negative items a few times a year—you can get one free report from each of the three major bureaus (Experian, Equifax, and TransUnion) per year.

If you find any negative items (collections, late payments, etc.), write a letter to or call the original creditor. Explain the circumstances that led to the negative item, and request that it be removed from your report. It can be surprisingly effective, and removing a negative item will improve your credit score in a hurry.

I had a 30 and 60 day late on my credit from B of A that were on accounts that hadn’t even been open for years. It was super easy to get them taken off and my credit score benefited greatly! The higher your credit score the lower your interest rate!

Talk to a Lender                                                                                                                                   Even if you’re not ready to buy yet, a lender can pull your credit for free and help you to create a plan to be in the best shape possible to buy a house. They can let you know items that will need to be paid off or paid down, how to increase your credit score, and help you to determine a good price point you’ll later be looking for which will help you to save up enough for a down payment! It never hurts to plan ahead. Especially for one of the biggest purchases of your life!

About Rachell

 

Rachell Pintor | Licensed Realtor with Twins & Co. Realty | Mobile: (602) 574-3438 | Email:  Rachell@TwinsandCompany.com

Mortgage Monday with Matthew (a day late): Refinancing…Even Small Savings Have a BIG Impact

Interest rates are always changing.  Inflation and other economic events (like the recent Brexit) can have a significant impact on interest rates.  Recently, interest rates have dropped dramatically.  This is great news for anyone looking to purchase a new property or refinance an existing loan.  For now, we will focus on refinancing.  What impact can that change in interest rates have on you?

Let’s look at an example and crunch some numbers.  Assume you have a $200,000 loan at 4.25% interest.  The principal and interest portion of your payment would be $983 per month…originally $275 allocated to principal and $708 to interest.  Under this scenario, you will pay $154,196 interest over life of loan.

Now let’s assume you can improve that rate by 0.5%.  How much of a difference will it make?  That same $200,000 at 3.75% results in a monthly principal and interest payment of $926…$301 towards principal and $625 towards interest.  That savings of $57 per month might not seem like a big deal, but it has a huge impact.  Not only are you saving $57 per month on your total payment, but more of the new lower payment is being allocated to principal…$26 to be exact.  That is a net monthly savings of $83.  And that monthly savings really adds up over the life of the loan.  The total interest due drops by over $20,000 to $133,443.

The bottom line is that what may appear to be minimal savings on a monthly basis can make a huge difference when compounded over time.  I would love to help you start saving money now.  Call or email to find out how much you can save on a refinance.

goldberg-website

Matthew Goldberg | Loan Officer | Primary Residential Mortgage Inc. 

P: 480-787-2233 | mgoldberg@primeres.com | NMLS # 1342195 | AZ LO-0930826

9280 S Kyrene Rd #134 |Tempe, Arizona 85284 | NMLS # 3094 | MB-0902614

 

Down Payment Assistance Programs

With rent so high, it can be very difficult in today’s market to save for a down payment.The average rent has gone up at least 22% just in the past 5 years. So how can the average Joe get out of this vicious cycle of doing their best to save to buy a home? By using a down payment assistance program.

There are several programs out there to help people meet their dreams of home ownership! Here’s an example of just one of many. This program is particularly helpful for military, first responders, and teachers.
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If you would like help finding the right down payment assistance program for you, feel free to contact me!

About Rachell

 

Rachell Pintor | Licensed Realtor with Twins & Co. Realty | Mobile: (602) 574-3438 | Email:  Rachell@TwinsandCompany.com