You heard me right. Say goodbye to that low, low rate of just a few days ago. The election of Donald Trump has set the economy in a whirlwind and thrown mortgage rates through the roof.
The day of the election my 18 year old son who is a student at Patrick Henry College (great school btw) asked what a Trump win would mean for my business. I told him a convoluted story about how Trump's main focus is putting America first and putting money back into business, etc. It's simple supply and demand. More money into the hands of the consumer (be it through more jobs, lower taxes, etc.) means more money spent. More money spent means and upwards pressure on prices. Upwards pressure on prices means inflation. Inflation means higher mortgage rates.
Now in the world of today, it's oftentimes not that simple, but it's safe to say that history is repeating itself and mortgage rates ARE going up after the election.
So what do you do? Here are some tips if you are looking at purchasing or refinancing.
What to do if I'm considering refinancing?
GET IT DONE NOW. Sorry for all caps, but really that's how I feel. If you waited until now, it may be too late. Note the word MAY. Best to get a quick check up or have your refinance figures reworked. Rates will not be sub 4% in another 6 months. Sorry. Come back and check and you'll see I was right.
To get your refinance check up the quickest thing is download my refinance questionnaire and upload it to me securely. We can work something up on my mortgage analyzer asap.
What to do if I'm considering purchasing?
Expedite your home search and negotiations. I really need more space to give you my entire opinion here but I'll give you the cliff notes version. If you wait on the perfect home or worse yet, try to negotiate that extra 2k in seller concessions you will probably get burned.
A perfect "warning" example is of a client I heard about today (not mine) who literally was fighting the seller over 2k in concessions. In the 2 days they were fighting over this, the market moved about 200 basis points. That 2% in points difference which on his $400,000 loan amount just cost him $8,000.
Another issue aside from the more immediate market movement potential is what the longer term rate increases will do to your buying power. Simple math. If rates were 3.75% today, your PI payment on 360k borrowed would be $1667/month. That's 10% down on a 400k home. If rates go to 4.25%, to keep the payment at that $1600/month payment, the home price would have to DROP to $375k! Now factor in the NAR statistics that home prices are expected to rise 4.2% in 2017 for Washington Metro DC, you've now got that working against you!
Imagine now that in May 2017 rates are 4.25% and the market went up 2% (1/2 of the expected increase), that $375k house that you can buy now (to keep that payment of $1600 remember?) was the $365k house you were looking at 6 months prior!
So to sum it up, you are losing approximately 8-10% in purchasing power due to the rates and home prices increasing. If you want to see a spreadsheet or discuss my math in detail, just write me a comment. I have data to back it up.
If you are a little further out in home purchasing, make sure you do 2 things.
1. Get my mortgage analyzer at www.EMAboss.com - this will let you play loan officer.
2. Download the Home Buyer Scouting Report on your smart phone. It's a consumer facing MLS search that private (not public like zillow & trulia) and 100% accurate since it's real MLS data. You'll need my VIP code: ELMENDORFTEAM for access.
I hope this helps. For any questions, leave me a comment, or visit me at: www.loanwithrick.com