Navigating mortgage rates might seem daunting, but fear not! I’m here to simplify it for you. Whether you’re buying or selling, let’s embark on this journey together and ensure you get the best deal possible.
Hey there, fellow Metro Detroiters! If you’re keeping a close eye on the real estate market, especially the residential housing scene, you’ve probably noticed some twists and turns in navigating mortgage rates lately. Buckle up as we take a journey through the maze of mortgage rate updates and delve into what’s been shaping these changes.
Understanding the Driving Force Behind Mortgage Rates
So what/s the deal with mortgage rates? Well, to grasp the intricate dance of rates, we need to focus on the 10-year Treasury yield rather than the Federal Reserve’s interest rates. The real influencer here is the 10-year yield, not the Fed’s policy rate. You see, when COVID hit, the Fed tweaked policy by stretching the gap between the 10-year yield and mortgage rates from 1.75 to a whopping 2.75. Due to inflation and the huge increase in home prices, the Fed hasn’t changed the gap. If they eased back to pre-COVID numbers, we’d be seeing lower rates, my friends.
Why are the Feds’ Hold the Line
Why is the Fed playing puppeteer with this gap? Two key reasons. Firstly, they’re on a mission to tame inflation, and that includes keeping housing prices in check. A downward nudge in home prices? They’re all in. Secondly, they’re looking to exit the primary mortgage market, leaving room for banks to take center stage and use their own funds to back loans. This shift has its implications, especially when selecting the right lender for your home loan.
Navigating Mortgage Rates Increases
Mortgage rates have surged dramatically this summer, reaching levels in the 7% range. Despite a consistent month-over-month decrease in inflation, we find ourselves grappling with these sky-high rates. It’s important to remember that Mortgage Rates closely follow the 10-year Treasury Yield. The rise in interest rates can directly impact the uptick in the Treasury yield. Notably, the yield has experienced a steady climb, reaching its peak on August 21st at 4.3240. This spike caused Mortgage Rates to reach an uncomfortable high of 7.23% – a tough pill to swallow. Another contributing factor is the persistent challenge posed by our jobs report. While unemployment remained low in July, a surprising .04 or a 14% increase in hourly earnings added another layer of complexity to the situation, further complicating efforts to manage inflation.
Track the 10-Year Treasury Yield
If you want to be a pro at navigating mortgage Rates, then …Follow the Yeild.
The Good News on the Horizon
The 10-year Treasury Yield is on a downward trend, and as history has shown, mortgage rates tend to follow suit. As of the end of August, the average mortgage rate saw a drop to 7.18%. Now, let’s delve into what’s driving this positive shift. Despite steady inflation figures, the recent job report for August highlighted a rise in the unemployment rate and a slight 0.2% decrease in average earnings compared to the previous year – both of which were slightly below earlier predictions. It’s quite intriguing how managing wage increases is becoming a key factor in steering our economy towards recovery, aiming to lower prices and rein in inflation.
Let’s Delve into the World of Freddie Mac and Mortgage Rates
After the infamous “Crash of 08” and the subsequent Dodd-Frank Laws reshaping lending practices, banks found themselves with limited options to replenish funds for lending purposes. Enter the Feds, becoming the primary avenue for banks to offload mortgages and keep the lending wheels turning. This shift led to giants like Lehman Bros. and Country Wide facing bankruptcy. Navigating Mortgage Rates in today’s market place you need to follow Freddie Mac PMMS.
Fast forward to today, if your lender is funneling your loan into the Freddie Mac PMMS machine, it’s crucial to keep an eye on the trends. But fear not, there’s a Plan B in the works too. You can scout for lenders who utilize their own funds, granting them the power to set their rates independently. I’ll delve into this further below, so keep reading to get the full scoop!
Freddie Mac PMMS
Future of Mortgage Rates
Get ready for a potential shift in the mortgage landscape. It seems that the Federal Reserve is nudging banks to get more involved in the mortgage game once again. This could mean higher rates for Freddie and Fannie mortgages. Banks might just have to roll up their sleeves, compete for your business, and take the reins by using their own funds to set interest rates. This could cause a ripple in navigating mortgage rates. It’s like a call to adapt or step aside. This move might just pave the way for a whole new approach to how Freddie and Fannie operate down the road, ushering in fresh policies and changes. Time will tell how this unfolds!
A Look Back: How the Current Mortgage Rate Compares to Historical Data
Look at the Mortgage Rate during the last housing boom… yikes 8.62%.
Let’s Look at Ways to Save Money
Looking to snag a killer deal on your mortgage rate? Keep your eyes peeled for lenders who are putting their own cash on the line to win your business. These folks aren’t just pushing papers through the Freddie or Fannie system; they’re setting their own rates based on their own stash of cash. Your aim should be to identify lenders who invest their own funds into the loan process and are eager to compete for your business.
So, here’s the lowdown to Navigating Mortgage Rates.
Investor-Backed Conventional & FHA Loans: Seek out lenders who leverage their own investor funds to offer loans like Conventional and FHA mortgages. This allows them to establish their own competitive rates that align with your needs.
Exploring Adjustable Rate Mortgages (ARMs): Consider the advantages of an ARM, as it often comes with lower rates and reduced fees or points. Keep in mind that the recent revamp of these programs ensures that there’s no longer a balloon payment due in the fifth year. This topic is worth discussing with your lender to make an informed decision.
Federal Reserve Financing: Some lenders still utilize funding from the Federal Reserve. While this might mean adhering to the Federal Rate initially, you can negotiate with the sellers to include concessions that lower your rate by 2% in the first year and 1% in the second year. If rates become more favorable or increase by the third year, you can consider refinancing.
- Ask Sellers to buy down your mortgage rate. See the below:
Do Your Homework to Find the Best Lender and Program for You
💥 Important 💥 We’ve seen many changes lately with high mortgage rates and now lenders are designing special programs to help you and compete for your business… Great News!
✅ Do ~ Find out your FICA Score not your credit score. Check with your banking institution, they usually provide free FICA Scores. 🛑 Don’t give a lender your SS# to pull credit until you found the program that works best for you.
Important Do’s and Don’ts
✅ Do ~ Pull a free credit report from your bank or Free Credit Agency. ✅ Do ~ Call around and find independent banks that are setting their own rates. Check with your Credit Union as well. ✅ Give the lenders your FICA score to get quotes. 🛑 DON’T ~give out your Social Security Number as they will pull your credit. Wait until you select a lender and a program that works best for you then make an application. You’re getting rough quotes for now based on the FICA score you obtained, it doesn’t have to be exact for now. You’re in the weeding-out phase of your search. ✅ DO ~ contact me with any questions you may have via my cell at 248-343-2459
🙋♀️~ Not sure where to start?
Get Your complete Do’s and Don’ts list during the loan process. I do have lenders I’ve pre-screened based on low fees, special programs, rates, and best service. Let’s connect and discuss your options. You can also check with your Bank or Credit Union. Just don’t give out your SS# so they can’t pull credit until you’re ready.Co
The Take Away on Mortgage Rates
Here’s the scoop: In most cases no more wrestling with bidding wars, shelling out big bucks over the list price for your ideal home. So, why not make the most of this chill moment in the housing market? Snag yourself a home that ticks all your boxes. Down the road, you’ve got the option to refinance when mortgage rates go down and it will be sooner than later. We are getting closer to the Inflation Rate of 2%. So get ready to dive in. Let’s chat, and we’ll crunch the numbers together. That way you’ll be set to lock in that home sweet home at a seriously wallet-friendly mortgage rate.
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Through Education
As we move forward, it’s been challenging as we navigate through all the changes. Putting your dream of a new home on HOLD shouldn’t be one of them. Now more than ever, knowledge will help you set up your Negotiation Power. Check out Categories for additional updates regarding the Housing Market.
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