Unless you’ve been living in a cave as of late, you are probably well aware that the financial and lending climate has changed dramatically…and it continues to be very dynamic. Every week, we have lender changes, investor changes, market changes, etc. that can affect how borrowers can structure both purchase and refinance loans. Rates have been and continue to be extremely attractive…are they the absolutely lowest we’ve seen in the past month? No, not today. But sometimes waiting for that lowest point can hurt your ability to get your financing completed. Here’s a real life example…
I have a client who wants to refinance her condominium. She currently has a 30-year fixed loan at 6.625%…way above the market. A few weeks ago, I quoted her a new 30-year fixed at 5.25% with no points which would save her $520 per month! The client, in listening to the misguided media and well-meaning but misinformed parents, decided to wait until rates dropped to 5.125% as she did not feel they were “low enoughâ€. I counseled her about the possibility that rates could worsen while she waited for that 0.125% and that the current option would save her over $6,200 per year but agreed to monitor the market for her.
While she was waiting to pick the bottom, rates moved up as we saw selling in the mortgage-backed securities market. Then, to add insult to injury, Fannie Mae and Freddie Mac rolled out a new set of risk-based pricing “add-ons†that are MANDATED by Fannie and Freddie for all lenders. Factor in these “add-ons†to her refinancing pricing and now she’s even FURTHER away from that 5.125% she wanted…and not even in the 5.25% mix right now, either.
Moral of the story…a bird in the hand CAN be worth two in the bush. While waiting to save another $46 per month, she missed the opportunity to capture an additional $520 in her pocket! Will rates come back down to where she can even get the 5.25% again? No one knows for certain…but it will definitely be harder to get there for her particular file given the changes.
If you have a loan opportunity in front of you at a competitive rate which saves you money and/or satisfies what you’re looking to accomplish, jump on it while you can! You don’t know what changes lie in wait from the lenders in terms of structure and pricing or, even worse, if your company is about to go through layoffs, paycuts, etc. where your personal finances may no longer qualify you for a loan. Don’t miss the boat as opportunities may be fleeting.
Stacey Fleece is a Mortgage Loan Consultant with Countrywide Home Loans in Mill Valley in Marin County, California.