Changes to Refinances in 2020

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Recently Fannie Mae and Freddie Mac announced that they are raising fees on refinances. The new fee will add 0.5% of the loan amount to the borrowers’ cost. The fee was originally planned to be put in effect starting September 1st, but is currently being charged by lenders.. This fee will cause a slight increase of approximately 1/8th to the rate on many refinances

This fee was put in place to protect against risk of default or forebearance, since many borrowers have been taking the opportunity to refinance their home loans. Rates have remained low, and we can expect them to stay low going into next year. Fannie and Freddie state that this fee will not cause monthly payments to increase. Most borrowers who refinance do achieve a lower monthly payment; and this fee would only reduce those savings by about $15 a month.  

The fee will apply to most refinances, with some exclusions being:

  • Mortgages to purchase a home
  • Refinances with loan amount below $125,000
  • Refinance loan amounts above $510,400, or your conforming local limit (Jumbo Loan)
  • Home Ready refinance loans
  • Home Possible refinance loans

My mortgage interest outlook is that rates could increase due to expectations of greater inflation. The Federal Reserve has announced that they will keep the Fed Funds Rate low into 2023. However, that is an overnight borrowing rate to banks. Rates on long term fixed rate loans will reflect the inflation risk. Another factor that will put upward pressure on rates is economic recovery. In general, mortgage interest rates are very low now by historic comparisons. I see more factors motivating higher rates than lower rates at this time. One other factor that can push rates up is good news on a Covid Vaccine. Of course we all want an effective vaccine. But, I expect news of a vaccine will push rates up.

Bottom line – Rates are great now. Take advantage if you have need.

Let me know when I can help.

Do Low Interest Rates Make A Difference?

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Recently rates dropped to below 3%, which is a new low we have not seen for many years. In the midst of a pandemic this can be great news for many people who are looking to buy a home. Here in San Diego low rates can definitely help to make buying a home more affordable, but the amount of change it will make in the overall market may not be that much.

Home prices in San Diego have continued to rise over the past few years, and even now during the pandemic. This is a result of a continued low inventory of available homes over many years. At the beginning of the year there was already a low inventory, but once the state started to close down many sellers pulled their homes out of the market, understandably so. The homes that were still left started selling faster than expected and competition between buyers increased. If you’re thinking of buying be prepared to face some competition and to act fast when you find a home you want.

With unemployment rates still high, this means many people are simply not in the place to buy a home at all. Sadly, San Diego is already a city that can be difficult to afford. Many of the residents that lost their jobs would already have had a hard time affording a home. So while the low rates can help some people to afford a home, they won’t make a big difference in the overall affordability of owning a home in San Diego. Home prices will likely stay constant or possibly rise with continued competition within buyers.

Now, if you were able to maintain your job during this time and are contemplating buying a home, then now may be a great time for you. Requirements are getting tougher for loans, but it is still possible to get a low rate during this time. Let’s discuss your options today. Click here to get started.

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