Due to Covid-19 and the economic upheaval the country has experienced over the past year, it’s understandable that you may be hesitant to take out a mortgage and buy a house.
Mortgage rates, however, are currently at historic lows. If you’ve been thinking about buying a home, now could be the best time to do so.
And if you already have a mortgage, you may want to consider mortgage refinancing to take advantage of the low rates.
Why Mortgage Rates Are Low
When the pandemic hit in March 2020, countries around the world shut down public-facing businesses to keep citizens safe. This caused widespread unemployment and a stock market crash, and we’re still dealing with the repercussions of this economic crisis today.
So why are mortgage rates at such an all-time low?
Mortgage rates are directly affected by the economy at large. Once the economy started to plummet, the Federal Reserve lowered these rates to compensate and keep the broader housing market stable.
After this initial drop in March 2020, they continued to lower rates even further. By the end of December, the average rate for a 15-year fixed mortgage was 2.38%, and the average rate for a 30-year fixed mortgage was 2.89%.
By February 2021, the economy started improving and mortgage rates began to go back up. Despite this rise in rates due to a stabilizing economy, the average rate for a mortgage is still much lower now than anything we saw before the pandemic.
We can expect rates to remain relatively low for the next few years. In fact, it’s unlikely that we’ll see rates this low again after the economy fully recovers.
Should You Refinance your Mortgage?
Now is an excellent time for mortgage refinancing. Since rates are at historic lows, you may be able to secure a new interest rate that’s much lower than your old one.
A lower mortgage rate can save you a significant amount of money in interest payments over the next several years.
Refinancing also gives you the option to convert your mortgage type. You can go from fixed-rate to an adjustable rate mortgage, or the other way around. Switching to an ARM could be a good option right now, as rates are so low, but you may also be subject to rate increases in the future.
Alternatively, switching from an ARM to a fixed-rate mortgage could help you secure a lower monthly payment.
Before refinancing your mortgage, it’s important to check and ensure you actually qualify for a lower interest rate first.
If you’ve paid off a significant amount of debt since you initially took out your mortgage, or your credit score has gone up since then, there’s a good chance you’ll qualify for a better interest rate.
But if you’ve taken on more debt or lost a job, refinancing might not be the best option for you.
See What You Qualify For
Not sure what you qualify for or where to start in your search? Credible is a free marketplace platform where borrowers can get quotes from several lenders in their network for mortgage refinancing by submitting one short form. Mortgage types include jumbo, conventional and refinancing.
You’ll need a minimum credit score of 620 to qualify for their refinancing options.
If your credit score isn’t in the best shape and you’re having a hard time finding lower rates, some lenders in their network allow applicants to cosign with someone who better qualifies.
Should You Buy a House Right Now?
If you have the means to buy a house right now, you’ll enjoy some of the lowest mortgage rates we’ve seen in decades. You’ll likely pay less in the long run and you could also end up with a lower monthly payment.
With that said, it’s important to note that property values have been on the rise this year. This is because demand went up when the Federal Reserve increased mortgage rates. There are more people who want to buy homes than there are homes available for sale right now.
COVID-19 restrictions led to a large number of people working remotely. As a result, many have decided to move away from their jobs and closer to their families. Many people have also opted to move to more affordable suburban or rural areas this year.
Assess Your Situation
Whether or not you buy a home this year or refinance your mortgage will depend on your own personal circumstances.
Before buying a home, it’s important to assess your finances and make sure you can fit mortgage payments comfortably into your budget. In order to buy a house, you’ll need to have steady employment and a solid income.
You’ll also need to have a fairly good credit score as well as a low amount of debt relative to your income. On top of that, you’ll need to have enough money saved up for a down payment and for closing costs.
If these criteria apply to you, buying a house might be a good decision. Just keep in mind that it’s important to apply for mortgages before you start looking at properties. This will make it much easier to shop for homes because you’ll have a more accurate idea of your price range.
Every bank has its own formula for calculating mortgage rates. Your rate and the total amount you can borrow will vary depending on your unique financial situation.
Just because mortgage rates are low, however, doesn’t mean you should rush out and buy a house. Many people have struggled with unemployment this year and if your job doesn’t feel stable, now may not be the right time to take on a new mortgage.
It’s also best to wait until you can improve your credit score or hold-off on buying until you pay down your debt.
If you’re ready to buy a house, AmeriSave Mortgage is a lender offering a variety of mortgage loan types, like conventional, jumbo, fixed, and adjustable for purchase or refinancing. They don’t charge any origination fees and you can get a quote online.
What You Should Consider When Buying or Refinancing A Home
COVID-19 has significantly affected the way people buy and sell houses.
If you were looking for a home before the pandemic, you might have gone to open houses and taken tours in person. To abide by social distancing restrictions, many real estate agents have switched to offering virtual tours. Agents that are still offering in-person tours will typically require you to wear a mask for the showing. Large open houses have been put on the backburner until the pandemic subsides.
Refinancing your home, on the other hand, can be done entirely online and with ease. There’s no need to visit a bank or come to a closing table—you can refinance your home without stepping outside.
Banks and credit unions have always been a reliable avenue for refinancing a home, but today, there are more online-only lenders than ever before.
Mortgage rates in the US are currently the lowest they’ve ever been. If you’ve been thinking about buying a home or simply refinancing your mortgage to get the best interest rates, doing so can help save you a significant amount of money in the long-run.