Low Mortgage Rates
Many residents of South Carolina and North Carolina and of the Southeast are refinancing or purchasing right now to take advantage of very low mortgage rates. Often people see low rates advertised, but when they call, the rates are higher, sometimes they are even lower than advertised. Why? Really there are several factors that can affect your new mortgage rate.
Most of the mortgage rates for Fannie Mae or Freddie Mac bank loans are under 5%, but FHA loans (best for purchasing) are generally a little over 5%. Why is FHA rates higher? This is simply due to the type of loan and the pricing that generates directly from the FHA that is higher due to the higher risk for FHA loans for default or foreclosure (this is also why there is higher mortgage insurance costs for FHA).
Mortgage term can affect rate. Shorter terms are generally lower rates. 21 to 30 year loans are priced similar. 16 to 20 year is slightly better than 30 year (maybe 1/8% better). 15 year mortgage or shorter term can be much lower than 30 year. As much as 3/8% to ½% lower, but of course, the shorter the mortgage term, the higher the payment. On the positive side, the lower rate and term means you can save many, many $1,000’s of dollars over the life of the loan in interest (sometimes as much as $50,000., $100,000., or more). In some cases there is even a 1/8% less rate for a 10 year mortgage versus the already low 15 year fixed mortgage.
Closing costs can also affect rates. If you want very low closing costs, that is great, but you will pay more for your mortgage rate. This makes sense if you think about it. The banks have to make money on a mortgage somehow, so if there is little or no closing costs, banks can make up money by having a higher rate. At higher rates, Fannie Mae, Freddie Mac, FHA, and VA all pay banks and lenders more money at a higher rate. Of course the lower closing costs are nice, but the higher rate will mean a higher mortgage payment. Many customer select a very low rate so they can have a greatly reduced mortgage payment. This is good, but this can come with 1% or higher origination or discount fees. For many people, this makes sense, especially if you plan on living in this home a long time. The longer you keep the mortgage, the more beneficial it is to have paid higher closing costs for a lower rate. The best thing is to analyze the numbers with a skilled and experienced loan officer to see which is most beneficial for you.
Lastly, there are some underwriting factors that can affect your mortgage rate. Factors such as your credit score, the amount of equity in your home, loan size, if you are refinancing a mortgage only or getting cash out for bills or other purpose. Generally the higher your credit score, the better your rate. You are best to have a middle credit score of 740 or higher. When scores get below 740 and especially 700, your rate can go up greatly, or even cause your mortgage application to be denied. The amount of equity in your home is very important. If the total of all mortgages (including HELOC’s) are less than 60% of your appraised home value (or 60% LTV, Loan To Value), this gives you the best chance at a lower rate and improves you chances of mortgage underwriting approval. If you get over 80% LTV, rates can be higher and you will be required to pay for mortgage insurance. Sometimes, a customer rate can increase during the loan process because the appraised value comes in lower than expected. This is why it is important to estimate your home value as accurately as possible (consider that in some areas, home values are dropping, especially higher priced homes). Loan size can definitely affect your mortgage rate. Smaller loan amounts under $100,000., means a higher rate. Rates under $60,000. can be significantly higher. Loan amount between $250,000 to $417,000. generally have the lowest rate. Over $417,000 is a jumbo loan, and rates generally are higher like the very small amounts are higher. Lastly, cash out loans have a higher risk than straight refinance loans, so they are priced with a higher rate with higher LTV’s. The higher the LTV, the higher the rates on cash out mortgages, especially the higher you go over 60% LTV.
If you are looking for a mortgage right now or have a mortgage rate over 5%, than call or email me right now. Now is the time to take advantage of historically low mortgage rates.
-Gary Schoenholz – Loan Officer Manager – 15 years experience, 1000 loans closed.
Call my cell phone today- 864-979-1111.
Lower Mortgage Rates
one of those rare cases right now where you can get BOTH low rates and low closing costs. For most of this year if you wanted a rate below 5%, you would have at least 1% origination fees (or points). If you wanted $0. points, the rate would start at least 5%. Right now loans with $0 points have never been more affordable. Most $0. point loans can be had at 4.875% for 30 year fixed and some loans at higher loan amounts ($250,000. to $417,000.) and with higher credit scores can get rates as low as 4.75%. This means even if you have a rate of 5.25% or higher, it can be beneficial to refinance now, because of the lower closing costs. Rates are even lower for 15 year fixed for no points (4.5% or even as low as 4.375% for higher loan amounts). This is great news for all homeowners in South Carolina and North Carolina. With lower rates people are able to afford buying a larger home or homeowners are able to lower their existing mortgage payments and reducing their overall monthly budget. Plus when you refinance, many time you will skip one mortgage payment, this can often save over a $1,000.. If you have a mortgage at 5.25% or higher, now is definitely the time to look at how much saving you may save.
Consider this a last call for FHA Streamline Refinances. Starting next Tuesday, the popular rate-lowering program gets strict on borrowers.
