For first-time homebuyers – and anyone who’s planning to buy a home – the issue of mortgage rates is one that looms large. Even a small change in rates can translate to thousands of dollars of savings or additional debt.
Business Insider published an article pointing out four key things buyers should know about mortgage rates in 2020. There’s some information that we think is useful for Additional Financial members. Here’s our take on it.
Don’t Rush into a Mortgage
Mortgage rates recently reached a historic low, but that doesn’t mean you need to rush headlong into a mortgage if you’re not ready to do so.
The traditional way to buy a house is to tour it in person – sometimes more than once – before making an offer. An in-person tour allows you to examine the property up close. Even before you hire an inspector, you can get a feeling for the property.
While the innovations of real estate agents are admirable, including video lock boxes and tours, there’s no question that a virtual tour isn’t the same as in-person one. We’ve spoken to some buyers who feel a bit skittish about buying a house without ever setting foot in it.
The good news is that most real estate experts believe that mortgage rates will remain low for the rest of 2020 and at least into early 2021. Unless you’re determined to move quickly, you may want to wait until it’s possible to relax social distancing, so you can tour houses in person.
Don’t Let the Volatility of Rates Dissuade You From Buying
On a related note, you may wonder if some of the recent fluctuations in mortgage rates make this a risky time to buy a house.
Actions by the Federal Reserve have led to a drop in the target rate range, which mostly impacts short-term lending. However, it’s undeniable that mortgage rates are low and likely to remain so.
You may see some small increases due to an increase in home refinancing applications. The Fed may tweak the rates to give lenders some breathing room, but the key takeaway is that mortgage rates are at a 30-year low. That means it’s potentially a very good time to buy. However, if your financial situation is not secure, then it’s probably best to wait.
Fixed Rate vs. Adjustable Rate Mortgages
When mortgage rates aren’t at historic lows, it can make sense to opt for an adjustable rate mortgage. The same is true if you’re planning to buy a home that you plan to flip. The rates stay fixed for a specified period and then, they’re adjusted regularly in accordance with market changes.
That said, if you’re looking to buy a forever home, we agree with Business Insider that your best bet is to pursue a fixed-rate mortgage. A fixed rate allows you to lock in today’s low interest rates for the term of your mortgage, potentially savings tens of thousands of dollars in interest. Plus, they offer the highest degree of financial stability and predictability at a time of uncertainty.
We realize that mortgages can be a confusing topic. Remember that we’re here to answer any questions you have about mortgages and interest rates.
Credit Union vs. Bank Mortgages
There’s been a marked increase in the number of refinancing applications and that means many lenders are overwhelmed. That may be particularly true of big lenders.
For that reason, there are real benefits to choosing a community credit union over a traditional bank if you decide to apply for a mortgage:
- Credit union mortgage rates are often lower than bank rates.
- Credit unions are nonprofit organizations dedicated to community service.
- You’ll get personal service and more attention at a credit union than you would at a bank.
At Addition Financial, we recognize that these stressful times mean that first-time buyers may need reassurances as they walk through the mortgage application process. We’re here to help and happy to answer any questions you have, so you can feel good about the decision to buy a home.
Are you ready to apply for a mortgage? Click here to read about Addition Financial’s mortgage programs now!
Posted on May 17, 2020
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