Important read if you are trying to purchase a home !!!!
I’ve weathered some interesting markets in my past 23 years within the real estate industry. Whether it be the real estate boom in the early 2000’s, 9/11, the crash in 2009, and now this trying time in the World during the Coronavirus outbreak. If you are currently trying to purchase a home, you need to be aware of a few important things.
Does the Fed rate cut mean a 0% interest rate on mortgages?
The answer is a quick no. The Federal Funds rate is the rate that banks pay to borrow money overnight, not the interest that gets charged on loans, credit cards, or mortgages. While the general rule is when the Federal Funds rate drops, so do interest rates….it doesn’t always mean that they will. Check out this story on CNN https://www.cnn.com/2020/03/16/success/mortgage-rate-fed-cut/index.html
Why have mortgage rates increased if the Federal Funds rate has dropped?
It is mostly due to the increase in volume of new mortgage applications. Lenders try their hardest to take in as much business to accommodate the requests , but usually with a quick change we are experiencing they are understaffed. This creates a ‘traffic jam’ of applications, and Lenders are actually increasing interest rates to slow the influx of new business
If I am putting in a contract to purchase a home, how long should the process take before I can move in?
I’ve heard this question on every transaction I’ve been a part of. Where in a ‘normal’ market you would be able to close within 30 days, this is quickly changing. You will soon see Lenders requiring at least 60 days to close on your mortgage. You must remember that if the Lenders are seeing an increase in volume, then that means the appraisers, title companies, and home inspectors are as well. Not to mention dealing with the required social distancing. You will want to be cautious and ask for at least 60 days to close on your home loan.
The key is for all parties within the transaction is to set specific expectations upfront, so there is no scrambling 3 days before closing. If you have any questions or concerns on what to expect or what to negotiate within your contract, please reach out