The last few months have been a roller coaster when it comes to mortgage rates. Unfortunately the roller coaster seems to be going up more than coming down! However, last week the Fed announced their .75 bps hike and the next day the CPI inflation numbers came out. Those numbers were much better than expected and helped rates a lot! We saw interest rates improve by .25-50 point. Rates vary based on program, credit score and loan to value but they can vary from low 6’s to low 7’s depending on what you are doing. You can always pay points to lower the rate, but you want to make sure it makes sense to do that. Look at what you are paying in points and what the monthly savings is, then figure out how long it will take you to recoup the cost. Remember that many experts expect interest rates to drop in the next year or so and that may mean it makes sense to refinance.
A few other things to be aware of in the mortgage world:
Many lenders are talking about doing a 2-1 or 3-2-1 temporary buydown. This can be a great way to lower your mortgage payment. The program allows you to lower your interest rate by 1-2 points each year. So if you lock in a rate of 7%, using a 2 -1 buydown would lower your payment the first year by 2% (down to 5%), the 2nd year it would be at 6%. The third year your payment would be based on the locked rate of 7%. The seller contributes the funds to pay for this. So if your loan amount is $250,000, the total cost of the buydown is $5826.99 which comes as a seller contribution. In the first year, your payment is lowered by $321.20 every month. The second year your payment is lowered by $164.38. If you payoff the loan within the first two years, any money left in the account for the buydown will go towards your mortgage balance. The benefit here is that if you refinance in the second year, your mortgage balance will be lowered and that can help offset the cost of a refinance. So technically, the seller can help with your purchase by lowering your monthly payment in the beginning and they can help with your refinance by lowering your mortgage balance!
Early in October, many lenders came out with an “early bird” notice for the 2023 conventional conforming limit. The initial limit was $715,000. In November, we received a notice that the initial report was a bit high based on the last month’s numbers. The early bird conforming limit was lowered to $700,000 the end of October. We’ll find out the exact number for 2023 by the beginning of December but for now, it’s $700,000 – in 2022, it was $647,200! That is a huge increase!
None of us know exactly what will happen to mortgage rates in the next year or two. We do know the Fed is expected to raise rates again in December, probably a .50 point. That is already priced into the interest rate market. As we get more news regarding inflation and those numbers improving, it should help to lower rates. Also as the Fed members talk, it can give investors an idea of what is going to happen to the Fed funds rate and that can help with interest rates. What we have heard is that the rates should drop by the end of 2023. So then people are thinking they should wait to buy – the problem with that is home prices are not expected to drop. In reality, you may be better off buying now when the market is quieter and then refinancing when rates do drop. Just something to think about! We are still seeing multiple offers on some homes, it truly depends on the home and where it’s located and it’s price!!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
