Is There A Current Program That Will Quickly Enable Us To Buy a Bigger, Better Home? Is an Adjustable Rate Mortgage a Smart And A Safe Solution At This Moment?

Mortgage interest rates have been declining for a while now, so you may not even think about an adjustable-rate mortgage (ARM). There are a few reasons an ARM might make good sense for you financially even with today’s low 30-year fixed mortgage interest rates. ARM interest rates can be up to half a percentage point (or more) lower than a fixed-rate mortgage, especially when it comes to Jumbo ARMs and Super Jumbo ARMs. In high housing cost markets like Los Angeles and Orange County, along with many other high-cost counties in the State of California, a half-point difference in mortgage interest rate could help you to buy a bigger, better house.

What are the advantages of an Adjustable Rate Mortgage (ARM)?

As long as ARMs offer lower interest rates than fixed-rate 30-year mortgages, you may be able to qualify for a larger loan and therefore, a bigger, better house.

For example, if you wanted to buy a $1 million home, put 20% down, and apply for a 5/1 ARM at 3.35% interest, your monthly payments (excluding taxes and insurance) would be about $3,540. At 3.99% interest and a fixed-rate 30-year mortgage, your monthly principal and interest payments would be more than $3,800.

If there is no difference in interest rate between a 30-year fixed-rate mortgage and a 5/1 ARM, then the ARM won’t help you to qualify for a higher loan amount and a bigger house.

What are some pitfalls of an ARM?

ARMs come with different terms. Common ARM terms are 3/1, 5/1, 7/1, and even 10/1. The first number indicates the number of years you’ll have your initial interest rate locked in. So, a 5/1 ARM will have the same interest rate and monthly payment for five years. The second number indicates how often the rate can change after the initial rate period. You’ll notice all the common ARMs can have their interest rate change every year after the initial fixed-rate term. By “change”, you’re right — the biggest pitfall with an ARM is the potential for the interest rate, and monthly payment, to go up every year after the initial fixed-rate term.  Watch our short video clip below that explains the 3 Reasons why you should consider an Adjustable Rate Mortgage.

If you’re interested in an ARM so you can buy the home you want, and save on the compounding effect of interest, you should work with an experienced mortgage professional to locate an ARM that has terms you can understand and live with. ARMs can have caps on the amount their interest rate can go up when the fixed-rate term ends. They can also have a cap on the total interest rate increase over the lifetime of the loan.

Sources

https://www.realtor.com/advice/finance/i-got-an-adjustable-rate-mortgage/

https://www.nerdwallet.com/blog/mortgages/pros-cons-adjustable-rate-mortgages/

https://www.cnbc.com/2019/08/23/why-you-might-want-to-rethink-getting-an-adjustable-rate-mortgage.html

https://www.mortgagecalculator.org/calcs/5-1-arm.php

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Start your refinancing journey with confidence: Mortgage Refinancing Demystified Maximize Your Home’s Financial Potential

unlocking potentail

Are you a homeowner seeking to optimize your financial situation? Mortgage refinancing might be the key. When replacing your existing mortgage with a new one, you can use better interest rates, lower monthly payments, or even tap into your home’s equity. We will explore the fundamentals of mortgage refinancing and guide you through making the most of your home’s financial potential.

Why Refinance Your Mortgage? 

Discover the benefits of refinancing your mortgage, from lowering interest rates and monthly payments to tapping into your home’s equity for extra cash. Learn how refinancing can help you meet your financial goals and make the most of your mortgage.

Mortgage refinancing can provide various benefits, including:

  • Lower interest rates: Secure a lower rate to reduce monthly payments and save money in the long run.
  • Shorten the loan term: Refinance to a shorter-term loan to pay off your mortgage faster and save on interest.
  • Transition from an Adjustable-Rate to a Fixed-Rate Mortgage: Enhance financial stability and enjoy predictable payments by opting for a fixed-rate loan.
  • Tap into home equity: Access your home’s equity through a cash-out refinance to fund home improvements, consolidate debt, or finance other expenses.

When Is the Right Time to Refinance? 

Timing matters in mortgage refinancing. Uncover the critical factors that influence the right time to refinance, such as market interest rates, credit scores, and home equity. Here are a few factors to consider in calculating your break-even point to ensure refinancing works in your favor.

  • Interest rates: Monitor market interest rates and refinance when they are significantly lower than your current mortgage rate.
  • Credit score: A better credit score can help you secure a more favorable interest rate.
  • Home equity: Ensure you have enough equity in your home to qualify for refinancing.
  • Break-even point: Calculate the break-even point (the time it takes for the refinancing savings to outweigh the costs) and ensure you plan to stay in your home long enough to benefit from refinancing.

Types of Mortgage Refinancing

Different refinancing options are available, including rate-and-term, cash-out, and cash-in refinancing. Understand how each choice impacts your loan terms, interest rates, and principal balance, enabling you to choose the best solution for your financial needs.

  • Rate-and-term refinance: Change the interest rate, loan term, or both without altering the principal loan amount.
  • Cash-out refinance: Borrow more than the existing mortgage balance, pocketing the difference as cash for various purposes.
  • Cash-in refinance: Pay down a portion of the existing mortgage principal to qualify for better loan terms or eliminate mortgage insurance.

The Mortgage Refinancing Process

From assessing your financial situation, researching lenders, gathering necessary documents, and closing the loan, follow these steps to streamline your mortgage refinancing journey and secure the best deal.

  • Assess your financial situation: Review your credit score, debt-to-income ratio, and home equity to determine eligibility.
  • Research lenders and loan options: Compare offers from multiple lenders and select the best refinancing option for your needs.
  • Gather necessary documents: Compile proof of income, tax returns, bank statements, and other essential documentation.
  • Apply for refinancing: Submit your application and required paperwork to your chosen lender.
  • Lock your interest rate: Secure your interest rate with the lender to avoid potential rate increases during refinancing.
  • Close the loan: Review and sign the closing documents, pay any necessary fees, and finalize the refinancing process.

Mortgage refinancing can be an effective strategy for optimizing your financial situation and maximizing your home’s potential. You can successfully navigate the refinancing journey by understanding the different refinancing options and following the outlined process. To ensure you’re making the best decision, consider cget in touch with us for personalized guidance and support.

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Rising Mortgage Rates Could possibly Slow down House Price Surge. See what this entails to our first-time homebuyer folks

How Many Home Offers Face Bidding Wars?

According to recent Redfin data, three out of every five property proposals faced bidding wars in December 2021. Their data revealed that 59.6% of home offers filed by Redfin agents in the United States were subject to bidding wars, the lowest proportion in a year and down from a revised rate of 61.3 percent in November, up from 54 percent in December 2020.

Salt Lake City, Utah, has the highest rate of bidding wars among the 37 US metro areas studied by Redfin, with 74 percent of bids written by Redfin agents in December facing competition. Tucson, Ariz., came in second with 73.1 percent, followed by San Diego, Calif., with 71.1 percent, Virginia Beach, Va., with 70.6 percent, and Seattle, Wash., with 70 percent.

Rising Mortgage Rates Could Slow House Price Surge

The rising cost of home loans could halt the growing residential real estate market in the United States. House prices have skyrocketed across the country in the last two years, as the pandemic — combined with the Federal Reserve’s ultra-low loan rates — sparked a home-buying frenzy not seen since the mid-2000s housing bubble. Rates on mortgages have soared to their highest point since early 2020.

Since the Federal Reserve influences mortgage rates, interest rates have climbed in recent weeks following the Fed’s signal to act aggressively to prevent inflation from spiraling out of control. 

In the end, higher mortgage rates will make homes more expensive for certain people, particularly first-time purchasers. If the rate increase moves some buyers out of the market, this should ease upward pressure on home prices. However, so far this year, the rate increase has spurred more people to make bids for purchase because of the perceived fear of missing out on home-buying opportunities.

Supply Chain and Inflation Concerns Ding Builder Confidence Index

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) dropped a little this month, halting a four-month trend that had lifted the NAHB/Wells Fargo Housing Market Index (HMI) 8 points higher. In January, the index, which measures builder confidence in the market for newly constructed homes, fell one point to 83.

According to Robert Dietz, NAHB’s chief economist, the most significant problem for the housing market is a lack of inventory. While single-family starts in 2021 are likely to conclude the year approximately 25% higher than the pre-Covid 2019 level, rising interest rates will negatively impact housing affordability over the next year.

Next week’s potential market-moving reports are:

  • Monday, January 24th – No Report    
  • Tuesday, January 25th – National Home Price Index, Consumer Confidence Index
  • Wednesday, January 26th – New Home Sales Starts, FOMC Statement
  • Thursday, January 27th – Initial Jobless Claims, Continuing Jobless Claims, Pending Home Sales
  • Friday, January 28th – PCE Inflation, Economic Cost Index

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

Source

https://www.axios.com/2022/01/14/rising-mortgage-rates-house-price-surge

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