Photo by Evan Dvorkin
It’s an unprecedented time in America, as our country and communities grapple with COVID-19. Amid all the headlines about the virus and its impacts, interest rates are at a historic low. The Federal Reserve has cut borrowing costs to nearly zero. The bottom line: it’s a great time to buy a home.
If you’ve been keeping up with the news regarding interest rates, you’ll know that it’s been a bit up and down over the past few weeks. Slashing interest rates increases demand for loans, and floods lenders with applications as many buyers want to take advantage of the amazing rates. Ironically, this causes the rates to rise again, in order to handle the demand. The Fed seems committed to keeping these rates low to help buyers continue fueling the economy, so, you can expect this ebb and flow to continue as lenders seek the best ways to manage the demand for new mortgages in this time.
Getting the best interest rate you can won’t be a matter of swooping in on the right day of the week. Many lenders are backed up with applications, so not everyone will be getting the same rate, and there is more variance between lenders’ rates than usual. Although this current state could be described as “volatile,” you’re not at risk of getting a bad deal. Put simply, the system is oscillating between great interest rates and amazing interest rates. Research shows that even the “high end” of interest rates are relatively low in comparison to market tendencies. Nearly any rate you’ll find now is lower than it was a year ago, and likely lower than it will be a year from now.
As we all speculate on how the virus will impact different industries directly and indirectly, I’ve been thinking about Connecticut Valley Homes, a builder in Connecticut and Rhode Island that specializes in modular home construction. Perhaps a more controlled environment, like what modular home builders build in, could become more popular as the industry adapts to the crisis.
It can’t be overstated how valuable getting a low interest rate can be. The interest you pay on your mortgage is the not-so-hidden hidden cost of buying a home. A lower interest rate can easily save you hundreds every month, and thousands over the course of your mortgage. Paying $200 less per month means $72,000 less over 30 years (for the exact same home). And, with the interest rates we’re seeing, $200 could be drastically less than the savings you’ll find.
The most important thing we can do as a country is avoid large gatherings of people for the time being, and homebuilders have taken precautionary measures to avoid them. Builders like Richfield Homes in northern Colorado and Authentic Custom Homes in Oklahoma and Kansas City are encouraging appointment-only tours of model homes, and online virtual tours.