Mortgage rates for May 2019 have been good to homebuyers. The homebuyers and homeowners interested in refinancing who’ve been waiting patiently through 2018 are now jumping back into the market. Mortgage rates recently hit a 14-month low, bringing with them the potential for a lower monthly payment.
There hasn’t been such an optimal time for homebuyers to find a competitive mortgage rate in recent history. But one thing’s for sure: Once mortgage rates hit record-breaking bottoms, they usually start to increase.
As of mid-May 2019, mortgage rates dipped again to reach as low as 4.1 percent, according to Freddie Mac’s Primary Mortgage Market Survey. Current forecasts predict mortgage rates could reach around 4.6 percent at the close of the year. This is a more favorable, and more affordable, estimation than the 5-percent highs projected in late 2018.
Half a point interest rate increase may not sound like much. But depending on the home loan amount you qualify for, raising mortgage interest even half a point could cause a noticeable boost in your monthly payment.
Mortgage rates fell to a 14-month low last month, in April 2019, with the largest drop seen in a decade. If this trend continues, rates could reach their lowest level in more than a year. Buying a house at this low rate means that you most likely can afford more than you expected without having to change your financials. Buying at a lower rate may automatically move you up into a higher price range.
For first-time buyers, in particular, low rates mean more affordability. Some housing market analysts have speculated that first-time buyers may be being edged out because of rising home prices. Yet the National Association of Realtors’ (NAR) latest report on the percentage of first-time homebuyers shows that this group accounted for 33 percent of all buyers in March 2019. This matches numbers from the previous year.
So, first-time homebuyers are still interested and ready to purchase. Taking advantage of the current 30-year fixed mortgage rate hovering above 4 percent — a rate only available with an adjustable-rate or 15-year fixed rate mortgage just months before — can help first-time buyers maximize their homebuying budget while making monthly mortgage payments cheaper.
Pulsenomics’ Home Price Expectation Survey for the fourth quarter of 2018 projected a 3.8-percent home value appreciation for 2019. Buying now at a lower rate before the next home price increase also gives you a unique opportunity to start building your equity.
At its last meeting in March 2019, the Federal Reserve chose not to increase its benchmark rate again. The Federal Reserve’s moves impact mortgage rates indirectly, so pumping the brakes in order to stimulate the economy, as the Fed explained in their statement, can help keep mortgage rates from rising. Inflation also stabilized in 2019, contributing to the continued rate decline.
The real question is, how long will mortgage rates stay this low? Predictions have been made, but no one has a guaranteed answer. It can take months for mortgage rates to move down to these ultra-low levels. Potential homebuyers may not pay attention until rates start to rise again — by which point, it’s already too late.
NEW RATE LOWS MAY MAKE LOAN APPROVALS EVEN EASIER
To prevent another housing market crash, mortgage lenders aren’t as lax as they were leading up to 2008. But since rates were higher last year, in 2018, lenders may now be more lenient.
If you were previously denied for a home purchase or refinance, it’s worth your time to shop around and apply again. Look for a mortgage lender that has loan programs with flexible credit and no- and low-down-payment requirements geared toward first-time buyers.
MORTGAGE OPTIONS LIKE THESE CAN HELP:
Conventional loan: Ideal if you have fair-to-good credit and are able to put a minimum of 3-percent down. A 5-percent down payment is preferred if you have it since it may come with a lower mortgage rate.
FHA loan: Popular among first-time buyers and anyone who might not qualify for a conventional mortgage. A low (minimum 3.5 percent) down payment and flex credit score requirements are a big plus, with almost 30 percent of all FHA loans issued to borrowers with credit scores below 650.
USDA loan: Has attractive benefits like even lower mortgage rates and no down payment requirement when buying in a USDA-approved rural or suburban area. Getting qualified for this loan may be extra-easy as the government wants to boost rates of rural homeownership.
VA loan: Perks for VA borrowers who qualify include no down payment and more forgiving credit score requirements, as low as 620. Ellie Mae confirms that VA loans also have the lowest rates of all mortgage programs.
Rates normally rise faster than they drop. So, if you’re interested in buying a house or refinancing for a better rate, it’s a good idea not to wait. There are affordable loan programs for all types of buyers and income levels. And, all factors indicate that today’s rates may be the lowest that they’re going to be all year.
LOCK THAT RATE BEFORE IT’S TOO LATE
With the possibility of rate rises right around the corner, locking today’s low rate for up to 270 days can be a smart move.** You might save $74 a month by locking in a $250,000 loan at a 30-year fixed rate of 4.1 percent with a $1,208 monthly payment.*** Compare this to the same loan scenario with a $1,282 monthly payment and just a half-point interest rate increase.*** A rate lock also comes with a nice bonus: You’ll have the option to float down to a lower rate if rates drop within 45 days of closing. Contact me to find out how.