Interest rates are on everyone’s minds, especially if you are looking for a new home. We went to an expert Mortgage Lender, Jason Mullin, to help us better understand interest rates.
How are interest rates determined?
Interest rates vary from person to person. There are several different things that go into determining your qualifying rate, these are called Loan-Level Pricing Adjustments (LLPAs). LLPAs are things such as your credit score, your Debt-to-income (DTI) ratio, how much money you are putting down, if you’re buying the home as an investment property or primary residence, number of units – the list goes on and on. So if you call your mortgage contact, and ask “What are today’s rates”, getting a straight answer or accurate answer is very difficult without these answers (or an application).
What should first-time homebuyers know about current interest rates?
Interest rates are more volatile than ever. Rates are changing daily, and even a couple of times a day. The most important thing when you are under contract on your new home is if you like the payment, LOCK THE RATE. Loan Officers do not have a crystal ball, and cannot guarantee which direction rates are going, so if you are comfortable with the payment being quoted, lock. Second to that, talk to your loan officer about Lock and Shop options, Float down options, and any other options aimed towards making sure you have the best possible rate at closing.
How do you see interest rates changing in the next 6 months to a year?
I think interest rates will stay in this range over the next 6 months. I don’t foresee a large drop in that time period, but more importantly, I don’t see a large increase either.
How have interest rates affected the inventory of homes for sale?
Interest rates are the leading cause and effect of inventory. Homeowners with interest rates in the 3% range (or lower) are very worried about losing that interest rate to something in the 7’s and with that, not selling that home. If they are forced to buy, we are seeing more buyers trying to keep their low interest homes as an investment property. My hope is over the next couple of years, rates drop to a point where more people will consider letting go of those low interest rate homes, for something a little more reasonable (in their eyes).
With the slow of inventory, we are seeing more people wanting to wait to buy. The problem with waiting, is that everyone is waiting for the exact same thing. What this means, is once we get to that point of “low interest rates” is that instead of 1 person looking at a home, now you have 10 (or more) people looking at that home, and offering on that home – causing home prices to go up. So even with a lower interest rate, your payment will be higher.
Jason is a reliable mortgage lender with years of experience. If you are looking for a lender, contact him here.
