Consumers, aren't we all? If you own a home or are thinking about buying one, you just may be familiar with one of the battles going on right now. That battle involves interest rates. "Spoiled are we, yes we are," I say in my best Yoda voice.
In a world where some houses have stagnated or plain tanked in value, the same world where credit extended to folks in a position of uniqueness may have been stopped, we live in an economic atmosphere where some consider lower interest rates a part of the cure. (Between me and you and please don't tell a soul... these lower rates have probably been going on WAY too long as an economic stimulus. Frankly, should of ended long ago, but...)
Take advantage of them while you can! Many folks are sitting on the proverbial fence, wanting to know if rates may jump down a 1/4% or 1/8% or even a full freaking point! Today, interest rates still hover in the high 4% range for prime borrowers on a 30-year fixed rate mortgage.
Hesitation may cost or that roll of the dice may save you a buck or two. There are folks everywhere predicting where interest rates may end up. I believe in the cycle, the circle. Heck, I think we need to learn from nostalgia. More than that, my best advice is the following:
Turn in your mortgage application and supporting documentation right now! If you aren't ready to jump, at least you can practice that vertical leap when you are ready to lock in. This way you will have already set the wheels in motion whether you are waiting to buy or refinance or getting on the bandwagon right away. Here's a brief (albeit not totally extensive) list of what you'll need to get together:
* Last 2 years W-2's and 2 most recent pay-stubs
* If you are a renter, have your Landlord's name, address, and phone number handy. Make sure you have that info for the last 2 years of your rental history. Assuming you pay your rent by check (and I hope you do) get 12-24 months of cancelled checks.
* Last 2 Months Bank Statements (All Pages) & the most recent statements on all asset accounts (401K, IRA, Mutual Funds, Retirement, Etc.)
* If you are Self-employed, you'll need the last two years tax returns with all schedules and attachments... along with a year-to-date Profit & Loss for your business.
* For purposes of identification, you'll need copies of your social security card and photo I.D. (typically your Driver's License)
* If you are refinancing, you'll need a few of the things above... but will also need your most recent Mortgage Statement & Homeowner's Insurance Dec page (which is the top page of your Homeowner's Insurance). It's also a good idea to get copies of your most recent statements on all other accounts you want to pay off... assuming you want to consolidate high interest debt.
* If you own more than one property, you'll need the most recent Mortgage Statement, Homeowner's Insurance Deck Page, & copy of any leases you have on rentals.
* Any credit issues (late payments, bankruptcies, judgments, etc) must be addressed in a very detailed credit explanation letter and appropriate supporting documentation, if applicable.
* If you aren't currently escrowing your taxes, you will need copies of paid/unpaid tax bills.
* Retirement/Social Security award letters if you are receiving that type of income.
Getting these things together and submitting to the lender will help ensure there are no delays when you want to lock-in to that killer interest rate.
Think about it... hard and wise. Speculation got us in trouble. Don't let it do the same to you. While you may turn out right in interest rates dropping a slight percentage here and there, it may not be wise to opt for a $300.00 savings if you can get approved for something that will save you $200.00 right now. What if that $200.00 savings goes away all together? Roll the dice all you want, my friends... if you can attain (at a relatively decent cost) fixed rates on a mortgage of any kind in the 4% bracket, history will probably be very kind to you. Expect at least 7% before the Mayan Calender comes into play:)
How to help make sure your loan closes as fast as possible.
Jason - who knows where interest rates will go...up, down. left, right. I so agree with you (now don't spit out your coffee on that one) buyers should get their application and documentation in so when they find that perfect house, and great rate, they are ready to roll.
Can you live with this rate? That's what I ask my buyers. No sense on losing what you can have today for what you might have tomorrow...
Gee - What happened? I'm never the first comment...I feel so special : )
Come on Jason---you are being WAY too logical here:)
Sandra - If you are agreeing with me, that Mayan Calender may have something to it:)
Josh - "No sense on losing what you can have today for what you might have tomorrow..." lots of truth to that.
Sandra - Stalker;)
Charles - Every once in awhile, guilty as charged.
Well done Grasshopper! Pipelines are loading up fast. That being the case, consumers are wise to at least take a place in line in preparation to take advantage of a once in a lifetime event. Loved the speculation comment - soooo true! Well done.
Mr. Sardi, I trust you on these interest rate issues. A quick question: I have a client who has about $1 million down for a purchase up to $1.5 but since he has been self employed for less than two years he can't get a small loan...are lenders crazy? Just thought you might have some insight:)
Scott - That's the bottom line, at least amass your troops so you are ready to strike. Thanks!
Diane - "...are lenders crazy?" Sometimes I think they are crazy to extremes. They like to see the self-employed for at least 3 years. You may have to try a hard money loan to get him into the house and then refinance into a more conventional loan down the road.
Jason, my statement is "I subscribe to the bird in the hand" approach. If you like it take it. The reality is as soon as the Fed and Treasury Dept have flushed out their desired level of refi's from the MBS pools, they will be out of the game and rates will sail right back up.
Jay
Why would anyone wait for an eighth percent drop if the house they really want is available NOW? Is it the miniscule price difference or the end product people are most focused upon? I don't care how many mark-downs those shoes get if I don't love them. The same SHOULD be true with so-called consumers. Take the plunge for what you love when it comes along. You may never find something that wonderful again! That philosophy fits more than just real estate ;-) I'm tring to follow my own advice here...
Great post as always My Jason!
Jason - Well said as usual ! There certainly seems to be this "frenzy" that is out there... I know more so with the REFI market, but a little bit with purchases. The big picture is the folks benefiting frm these low rates are in an awesome position !
I had someone call me yesterday about refinancing. Should I wait, or should I do it now? I said do it this minute. How much lower can they go? I guess they could go lower, but WTH?? He wanted to argue with me that they would probably go lower because of the current state of the economy and wanted to wait?? I have never seen the rates this low, don't know if I will again. I say just do it.
When I started in the dark ages we had rates of 11% to 12% and we sold houses left and right.
Oh Mi Amigo, I have been gone for a few months and you have "mellowed"
Whats UP
I think it's too volatile right now and you never know if it's up or down.
Jason.. it's been volatile for months.... and you put it into easy to understand words... funny that many of us are thinking about the same things, considering that I just wrote about this myself... but in a different tongue. Good job... it's like a boyscout, be prepared. But in my statement, do it now...
Jason, these current rates are great. The sooner people realize that and go through the documentation steps you've outlined, the better.
We're sitting on 5.25 on a 30 fixed. I'm waiting for it to get to 4.25 with 1/2 point!
Jason - well stated, now the question is: Is it right for that person and knowing you, truth comes first. Honest he is, young sardiwalker.
As a homeowner this blog and others have helped me immensely. I turned in my paperwork yesterday and locked in yesterday's rates this morning at 4.5% for 20 years, no points.
As with buying a car, I researched the subject intensely for a couple of days to the point of knowing enough to be dangerous. Consumers that only look at the graphs on bankrate might wait too long. But after looking deeper, rates look much more tenuous.
I've heard that 85% of the loans are refi's, and the good rates are only for those with excellent credit and plenty of equity. Having only had a few economics courses 20 years ago, it seems illogical overall for the economy and the banking industry since most of these people were probably paying their previous mortgages of 7% (give or take) reliably.
Now I'm off to other subjects ... maybe life insurance is next.
Great post, I have bookmarked to pass on to clients. I do not have the same gift of explanation regarding loans that you do and appreciate the help in articulating these issues. Have a great weekend my friend!
Jay - Agreed. I like that approach. Speculation, while sometimes rewarding, gets more folks into trouble than it helps in my opinion.
Jennifer - Thank you sweetie;)
Chris - Yes they are if they act rather than wait and loom. At the very least, folks need to get their applications and supporting docs in now. You can't lock without them.
Audrey - You do know where to send those folks, right:) I agree in that we may never see them this low in quite sometime or again in our lifetime.
Joe - Thee of little faith. No "mellowing" on my end, just solid info every once in a blue moon:)
Neal - Volatile has described things for a very long time. If it's available now, take it!
Belonger - Isn't it odd that this was on both of our minds? I think it is on a lot of minds because we are seeing folks speculate and know inherently it could turn out to be a mistake.
Gary - Absolutely! At least do that part. If you want to wait, fine. But get your butts in gear and get the application and supporting docs in now!
Jeff - Then get your application and docs into lender(s) now. That way you can lock if the market gets there. I know this reputable guy in Allentown...
Fred - It has to be right. Thank you Darth Chamberlin.
Dave - You sound like a shrewd homeowner indeed. Good for you! That sounds like an excellent deal you got. Consumers (all of us) could learn a lot from what you just wrote. I hope you stop by more often:)
Russell - Thanks! And I do not have the gift to make such killer BBQ Sauce. Thanks again. Great stuff!!
It's hard to say where everything is going to end up, but if you have a chance to get a deal, it's certainly well worth taking into consideration.
Do you have a 3 year interest and principle free mortgage to ho;d me until the Mayan calendar runs out?? I am self employed and in the mortgage profession so I can show no income! Do you have a loan for me??
JL - Almost impossible (for sure) to tell. All I am saying is get your proverbial ducks in a row.
Delp - For you, anything. I've always liked the beard. And something tells me you are one of the good ones who shouldn't be washed away. Big banking sucks; I always liked the idea of portfolio lenders to constantly be in the mix. The Government can control our paycheck, but it can't/shouldn't control our lives.
Awesome post, Jason! Agreed... possibly coming soon are the days of the mandatory 60 day locks and waiting months to close refinances- a la the early 2000's.
JB - Thanks. You may be right. Bottom line for folks, get together all your documenation now!
Jason...good job and congrats on making MWIR!
At the end of the day for any prospective and "committed" homebuyer. Get-R-Done! If you have the financial capacity and can negotiate the right deal on the right property get with your loan officer/broker now. In waiting for more favorable rates to arrive it is more probable that you will regret your decision to wait. Times are changing, guidelines are changing, you may qualify better today than you will tomorrow. Don't lose a great opportunity for a fractional rate decrease.
Ron - Thanks Ron. While the right time is different from person to person and family to family, I do believe hesitation can cost.
Jason, Great post. I hope consumers will read it and call you. I would love to reblog it.