Good News and Bad News About Interest Rates

Interest rates are the lowest they have been in a LONG TIME. Prosperity Mortgage has 30 year conforming money at 5.125% with no points. This is value based pricing, so it applies to credit scores of 740-800. FHA rates, which are the same regardless of credit score, are at 5.5% with one point. On the jumbo side, rates are 5.375% with a 5 year ARM and 6.5% with one point for a 30 year fixed rate.

Ryan Dailey at Prosperity Mortgage told our office this morning at the sales meeting that people who purchased only a month ago are refinancing. Also, if you want to refinance, they can lock in your re-fi rate for 60 days and then you can take advantage if the rates go even lower!

For those out there who have heard the rumors about 4.5% interest...it's probably not the best idea to wait. If that does happen, there will be several factors in play. First, the 4.5% rate will only apply to loans under 417k and borrowers who have near perfect credit scores. Secondly, if rates go down like that, there will be many other buyers entering the market and the inventory will go down and prices will go up. Its better to buy now while prices are low and inventory is high and then if rates suddenly drop you can always refinance.

Now for the bad news: the underwriting guidelines handed down from Freddie and Fannie are getting much stricter. We are seeing loans fall through on something that comes back on the condo questionnaire, purchasers who can't get their former landlords to verify rent payments (or the landlords won't return the lenders' calls- another reason to be nice to your landlord!), and the whole process is requiring a lot more paperwork and time. Buyers are shopping around for the "best rate" and applying with lenders who then fall through right before settlement because something was not completed correctly. What you can do as a buyer to combat this: leave in that long financing contingency, and go with a reputable lender!