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- Although mortgage rates are volatile amid coronavirus concerns, rates are relatively low right now and are expected to stay low through at least the end of 2020.
- If you’re buying your “forever home,” you might consider choosing a fixed-rate mortgage to lock in a low rate.
- To find a rate you’re happy with, call a local lender — preferably early in the morning, right after mortgages are released.
- Read more personal finance coverage »
Buying a home is stressful even in the best of times.
But as the coronavirus affects everything from open houses to loan rates, searching for a home — and for a mortgage — is more overwhelming than ever.
Mortgage rates are constantly changing these days. Rates might be down by 10 points one day and up by 20 points the next. In such an unsure time, how are you supposed to find a rate you’re happy with? Keeping these four things in mind can help you in your search.
1. Rates may be volatile, but they’re still relatively low
The Federal Reserve has dropped its target rate range to 0% to 0.25%, resulting in low rates for things like credit cards and auto loans. However, home loan rates aren’t staying low like rates for other types of loans are. They’re increasing and decreasing all the time.
Mortgage rates are affected by factors other than the federal funds rate, such as consumer demand and the 10-year Treasury yield. As lenders receive a surge of refinance applications, rates may increase. When the Treasury yield drops, mortgage rates may decrease.
Whether rates are high or low today, you can take comfort in knowing that compared to rates over the last 30 years, today’s rates are still low.
“Generally speaking, rates now are the lowest they’ve ever been,” says Andy Taylor, general manager of Credit Karma Home. “If you can find a lender who has the capacity … then you should be able to lock in a really, really great rate.”
2. You don’t need to rush to find a mortgage right now
As virtual tours replace open houses and the home buying process slows due to lending teams working remotely, this isn’t exactly the most convenient time to buy. Rates may be low right now, but that doesn’t mean you should feel rushed to secure a mortgage before they rise again.
“Most folks think that rates are going to remain low for the foreseeable future, certainly through 2020 — probably through 2021 — because we’re going to need lower rates for economic stimulus and therefore, economic recovery,” says Taylor.
“Home buyers should consider whether or not they can delay the purchase of a home until after the pandemic subsides,” says Beatrice de Jong, consumer trends expert at Opendoor. “If you decide to move, there are some options, but you could see delays in closing and potentially risk finding out about a flaw in the home only after you’ve moved in.”
Maybe virtual tours and longer wait times don’t deter you. If you’re still ready to buy a house, then go for it. But don’t feel obligated to close on a house you haven’t seen in person just because rates are low right now.
3. If you plan to live in the home for a long time, consider a fixed rate
When applying a mortgage, you’ll choose between a fixed rate and an adjustable rate. A fixed rate locks in your rate for the duration of the loan. When you choose an adjustable rate, the rate typically stays fixed for three, five, or seven years, then fluctuates along with the economy.
Your decision between a fixed and adjustable rate depends on a variety of factors, and there’s no cut-and-dried answer to which you should choose. But if you’re planning to buy your “forever home,” then this could be a good time to apply for a fixed rate.
“If you can lock in a 30-year fixed at what are historically low levels, then I would say go for that,” says Taylor.
“I recommend a fixed rate mortgage because it provides stability in your monthly payments,” says de Jong. If the uncertainty of your rate fluctuating a few years down the line makes you anxious, you may prefer a fixed rate.
4. A mom-and-pop lender could make the process easier
Big-name lenders have a lot on their plates right now. Taylor points out that a locally owned lender or mortgage broker might be able to work more efficiently, and they can probably give you more personalized attention during this hectic time.
“If you can find someone who’s local and get them on the phone — I know that sounds a bit old-fashioned — that can sometimes go a long way,” says Taylor.
Taylor recommends calling local businesses early in the morning. “Because a loan is sort of a physical thing … There’s a physical limit on the number of them that are available,” he says. “There’s typically less inventory at the end of the day than there is at the start of the day.”
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