As has been a hot topic for the last couple of months is the status of mortgage rates. Leading up to the last 2 weeks, mortgage rates had been on an 11-week streak of gains, and that finally ended last week, and this week sees 2017 Mortgage Rates Declining. In the recent study released by Freddie Mac, who is one of the Government Sponsored Enterprises or GSEs in charge of creating the guidelines for Conventional Loans, shows that 30-year rates on Conventional Loans have dropped another 3 points or 0.03% to 4.09% for the week. Since its peak in the last 3 months of 4.32% mortgage rates are starting to normalize again as the gains witnessed did not have much ground to stand on. Since election night it had gone on as if mortgage rates were going to increase forever, and finally that trend has been stopped and hopefully this does a lot to bring confidence back into the market that has been lost in the last month or two. As we saw in the last two weeks, mortgage applications showed double-digit declines as potential borrowers were putting their plans on hold given the higher interest rates and less buying power.
With the Mortgage Rates Declining in 2022, we are beginning to see different loans begin to increase in popularity as mortgage rates are still higher than 3 months ago. Borrowers are starting to entertain the thought of a 15-year fixed loan as their program of choice. Yes, on a $200,000 mortgage the payment may be $450 or roughly 40-45% more per month, but if you can handle that increase in payment, you are still able to obtain a mortgage that has the same interest rate as 30-year fixed loans used to have before the increase in mortgage rates. This may not work for first-time homebuyers as these borrowers normally don’t have a lot of surplus in their budgets when they purchase a home which is why an increase in ARM Loans is beginning to be seen as well. For those borrowers who may not live in their home for more than a couple years, a 5/1 ARM may be best for them as an interest rate on this type of loan is about 3.25%. There are some catches with ARM loans and on 5/1 ARM, you will keep the current rate of your loan at 3.25%, however after the fifth year, your mortgage rate will adjust annually to whatever the market supports PLUS the margin built into the mortgage rate. If you have an ARM that has a 50 point or 0.50% margin built in your mortgage rate will adjust to the market value plus 0.50%. If the market rate in 5 years is 5%, your mortgage now becomes 5.50% for the next year until it adjusts again in 12 months. This is why ARMs are risky for individuals who intend on living in their home past the initial ARM length whether it be 3, 5, 7 or 10 years. With interest rates near historic lows currently, it is safe to say in 3-10 years, interest rates will rise and you will be stuck with a higher rate. For example on a $200,000 mortgage that adjusts from 3.25% to 5.5% will see an increase of $266 or over 30%!
As you see the Mortgage Rates Declining in 2022, you have to wonder if there are any loans to be had under 4% or if the days of getting loans in the 3’s is history. In terms of Conventional Loans, it is almost certain that you will not get a mortgage rate anywhere near 4% even with the best credit and 20% or more down payment. Conventional Loans at most lenders are only going to be around 4.5% at its best unless you are in the market to purchase points. If you don’t know, purchasing points can lower your interest rate by 25 points or 0.25%, however, the cost of 1 point is 1% of your loan value. If you want to decrease your 4.50% loan to 4.25% you will need to come up with $2,000 or 1% of your mortgage value. The other option to try and get near a mortgage rate in the 3’s is to look for one of the government insured products such as FHA Loans, VA Loans, or USDA Loans. Since the government insures these loans against default, they offer better mortgage rates and looser qualifications guidelines than Conventional Loans. Unlike Conventional Loans that need at least a 700 FICO score for the best rates available, you can get the best rates on an FHA Loan with a 620-640 FICO. You will be able to get a quality rate from an FHA Loan and not have to break the bank for a down payment as 3.5% is the only requirement for FHA Loans. Even though Mortgage Rates Declining in 2022 government insured loans will always be a better bet for borrowers looking to obtain the lowest mortgage rate possible without needing perfect credit. On a study released regarding FHA Loans, it is shown that over 60% of borrowers getting FHA Loans have between 600-680 FICO scores while Conventional Loans have under 20% of their borrowers with the same FICO score range. You can see why people with fair credit gravitate towards FHA Loans, it is just easier to get your loan closed and the best rate.
If you are looking to work with professionals who will work with you and your home ownership goals to make sure you get the right loan, then you are in the right place as Loan Consultants does exactly this. Our goal is to work with each borrower individually to ensure they are 100% confident in their loan choice. Even if right now isn’t the best time for you, we will not pressure you to get a loan done, but will help you along the way until you are ready. There is nothing worse than coming across a pushy loan officer who only cares about getting paid. You will NOT witness that here, we guarantee it. We look forward to hearing from you today at 888-900-1020 or by email at email@example.com. We are available days, nights, weekends, and holidays in order to serve you, the customer better!