Interest rates jumped 50 bps: beware when making home offers
There are a lot of folks pre-approved in the lower 3's rates. If you have pre-approvals out there and are making offers just be careful because rates just pushed past 4-4.125% range on conventional loan for owner occupant as of last Friday (every other loan also increased by 50-100 bps). This rapid change in rates reduces your borrowing power by roughly 10-12% so that 1Million pre-approval is now 880-900k and you've gotta either reduce your buying criteria or bring in that gap of 100-120G's cash/equity from elsewhere. Lots of buyers getting caught unaware and stretching themselves thin since this week. Check with your lender for new pre-approval amount before making any new offers. The era of cheap rates is over and market is going to be volatile for next two months till we reach a new equilibrium. Lots of buyers who still have preapproval from Nov-December are going to get burned in case they haven't followed up with lenders. Once new batch of buyers who got their pre-approvals in February start being majority of buyers, we should see some reduction in bidding and craziness as they realize their afforadbility is severely hit. Some folks may want to wait it out for two months to see where market is at. The last time interest rates were this high was Jan 2020. Good luck out there folks!
If you're already approved and you're in contract and got appraisal done, it doesn't change anything. I think what you're saying is really just applies to people who hasn't gotten their case approved through underwriter yet
Close but not entirely correct: If you are in contract, and have locked in rates, this doesn't change anything. If you haven't locked rates yet, you may be f***ed. Appraisal is irrelevant, only thing matters is the rate lock.
My first mortgage was over 8%.... 4% is phenomenal
It's all relative. 8% was the days when properties were less than a third of current values. 2.75% mortgages led to higher property valuations since monthly payments were super afforadble. Now that there's a reversion, something needs to change..
It is all relative but whenever rates are less than inflation its free money. Nothing needs to change unfortunately
Can't wait for > 5% mortgage rates, will really help with housing prices
I won't say it will go that much down, demand still remains stubbornly high and supply really low. Will help in some stabilization.
bwahahahahahaha No… people have enough money to burn on houses with compromised foundation. I think I may not be in on some secret… like a tree of money. TC: 300K
what’s BPS
Basis points. It's a measure for calculating in percentages. 100 bps changes = 1% interest rate jump
thanks!
Thank you for the reminder and forecast, OP! I am one of those that got pre-approved in January. Will check with my lender again before placing an offer.
There's a lot of people in your boat so don't fret! It's going to be hard adjustment and shocker initially, but wait and watch before making offers is probably best.
I ended up getting a 2.5 for 10 ARM during pre-approval and when I locked rates yesterday, they locked 7 ARM at 3.0. Unfortunately, rates got hiked in past 2 weeks. You can also try credit unions for better rates.
People can choose arm and get the rates that folks were getting with fixed. Does not make sense to lock in a fixed rate now. Just buy with a low arm rate and refi later once rates go back down
I ended up getting a 3% on a 7 ARM with unlimited rate lock from Wells Fargo. Its a shitty rate for 7 ARM, but otherwise I am getting 3.3% for 30 year.
Thanks for the PSA!
Great advice ...if your qualfiying ratios were puching the limits when the rates were in the 2.75% - 3.25% range - you are likely not going to qualify now that rates are in the 3.75% - 4.25% range and you might need to lower the loan amt If you qualify fine - the only concern will be the fact the payment will be significantly higher if you keep the loan amt the same
YOLO