Tag: mortgage (Page 1 of 3)

Waiting to Purchase a Home Can Actually Be More Costly

March 17, 2025 / Tom Bonetto

Many prospective homebuyers wait to purchase a home in hopes of finding a better deal, saving for a larger down payment, or waiting for lower interest rates.

While these reasons might initially seem financially sensible, waiting to buy a home can often lead to higher costs in the long run.

Rising home prices, ever-changing mortgage rates, and missed opportunities for equity growth can actually make delaying a home purchase more expensive than acting sooner.

Rising Home Prices

One of the most significant reasons waiting to buy can be costly is the continuous rise in home prices.

Real estate markets tend to appreciate over time, meaning that a home that costs $300,000 today could be significantly more expensive in just a few years.

By postponing a purchase, buyers risk paying tens of thousands of dollars more for the same property in the future, making homeownership less affordable.

Missing Out on Equity Growth

Owning a home allows buyers to build equity as property values increase and mortgage balances decrease over time.

When buyers delay purchasing, they miss out on the opportunity to build wealth through home appreciation.

Homeownership acts as a forced savings plan, and the longer one owns a home, the more equity they accumulate. Waiting means missing years of potential financial growth.

Renting Costs Add Up

Many people choose to rent while waiting to buy, but rent payments do not build equity or provide long-term financial benefits.

Additionally, rental prices tend to rise over time, often making renting more expensive than a fixed mortgage payment.

The money spent on rent could be used to pay down a mortgage instead, helping buyers secure their financial future.

Limited Housing Inventory

As demand for homes increases, inventory often becomes more competitive, making it harder to find an affordable home.

If a buyer waits too long, they may find themselves in a market where fewer homes are available within their budget.

This competition can drive up prices even further, making it more challenging to purchase a home at a reasonable cost. Find out more on that here…

In Conclusion

While it may seem like waiting to buy a home provides financial advantages, the reality is that delaying can lead to higher costs due to rising home prices and lost equity opportunities.

Renting also provides no return on investment, while housing market competition can make future purchases more difficult.

For many buyers, acting sooner rather than later can be the most financially beneficial decision. Do reach out to me so we can put a plan together that will help you purchase a home in the very near future!

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Now Is the Time to Apply for a Mortgage – Mid-March 2025

March 10, 2025 / Tom Bonetto

If you’ve been sitting on the sidelines waiting for the “perfect time” to buy a home, this might be the sign you’ve been looking for.

Mortgage applications just jumped 20% in a single week, according to the latest C NBC report, mostly due to falling interest rates.

two red balloons with percentage symbols on white background

What does that mean for today’s buyer? It means the window of opportunity is open—but it probably won’t stay open forever.

Mortgage demand is surging as rates drop. Don’t wait—now’s the time to apply and lock in your opportunity before competition heats up.

What’s Happening in the Market

After months of higher rates, interest rates have dropped, and homebuyers are wasting no time. More buyers are getting pre-approved, locking in rates, and hitting the market before competition picks up even more.

We’re already seeing the shift. The number of mortgage applications surged, and with spring homebuying season just around the corner, this is just the beginning.

When demand for homes pick up, so will the price of buying that home. You can find out more on that here…

Why Do a Mortgage Application Now?

Here’s what’s happening in the marketplace today:

Rates dropped – and we don’t know how long they’ll stay this on this downward trend.
Competition is rising – as more buyers jump back into the market, the best homes will go fast…and the rest will become more expensive.
Waiting could cost you – not just in rate increases, but also in bidding wars as demand grows.

What This Means for Would-Be Buyers

If you’re serious about buying this year, you have a couple of choices:

Take advantage of today’s rates and get pre-approved before the rush.
Wait, hope rates stay low, and risk higher prices and more competition.

The Bottom Line

There’s a lot in this housing and mortgage market you can’t control. But getting ahead of rising competition and securing a better rate is something buyers can do right now!

If you’ve been thinking about buying, do reach out to me here.

We can take a look at your options, answer any questions, and help you get prepared to take full advantage of this moment.

The Fed Has Finally Cut Its Federal Funds Rate. Now What?

September 18, 2024 / Tom Bonetto

fed building facade against stairs in city

Federal Reserve officials and most investors have long expected that borrowing costs would be reduced in 2024, at some point.

As of today, the Fed finally cut its federal funds rate (the inter-bank lending rate) by 50 basis points.

Why So Long?

At the end of last year, many were hopeful that the Fed would begin cutting rates early in 2024, easing pressure not just for consumers, but also for businesses. A spring rate cut seemed to be in the cards around the turn of the year and most prognosticators estimated the first cut would arrive sometime before the summer.

But for the first 8 ½ months, those rate cuts never materialized. Inflation was much, MUCH more stubborn than they anticipated and stayed above their target. The Fed was very cautious and wanted to see the numbers come down over the course of this year.

Interestingly, inflation has still remained over their 2% target…but unemployment has grown and is now over 4%.

However, all of that changed today, as the Federal Reserve cut their inter-bank lending rate by 50 basis points.

What Does That Mean for Mortgage Rates?

scrabble letters spelling fed on a green mat

Interestingly, the Federal Funds rate does not directly control mortgage rates. And mortgage rates remained unchanged after the announcement.

Mortgage rates are far more influenced by the bond market…the 10-year Treasury to be exact. You can find the specifics here…

Over the last two decades, the Fed Funds Rate and the average 30-year fixed rate mortgage rate have differed by as much as 5.25%, and by as little as 0.50%.

A far better way to track mortgage interest rates is by looking at the yield on the 10-year Treasury bond. The 30-year fixed mortgage rate and 10-year treasury yield move together because investors who want a steady and safe return compare interest rates of all fixed-income products.

U.S. Treasury bills, bonds, and notes directly affect the interest rates on fixed-rate mortgages.

How? When Treasury yields rise, so do mortgage interest rates.

That’s because investors who want a steady and safe return compare interest rates of all fixed-income products…and investors move to these type of products to fulfill their needs.

Today’s Actions

We have seen a very nice move in the reduction of mortgage rates over the last 100 days, as the bond market has seen inflation slow a bit and unemployment rise. The bond and mortgage backed securities markets have been ahead of the curve on rates.

Rates have moved nearly .75% to the good for would-be buyers or refinancers.

I do believe we will continue to see rates move lower, but at an inconsistent pace. There will be bumps in the road…so locking in now might be a good idea.

Housing Pricing Pressure Ahead?

As rates move lower, more buyers will become eligible to purchase. In fact, the National Association of Realtors states that for every 1% decline in mortgage rates, 5 million more people can be eligible to buy.

Even if a small fraction of these eligible buyers decides to move forward, it will likely pressure prices higher and shrink the number of available home choices even further. More on that here…

The Bottom Line

Home price appreciation remains strong and inventory is slightly increasing. The fact that mortgage rates are coming down will only add to an increase in housing prices, as that’s basic supply and demand.

Home values continue to set new all-time highs, and housing still proves to be one of the best investments out there.

If you’ve been thinking about purchasing, now is a good time to do it! Reach out to me so we can strategize about your next purchase or refinance.

Should You Buy Down Your Mortgage Interest Rate? | Pros and Cons

February 17, 2024 / Tom Bonetto

When interest rates are high, some borrowers may choose to buy down their interest rate to lower monthly payments and make their mortgage more affordable.

Buying down the interest rate means paying an extra upfront fee to get a lower rate and monthly payment. This is referred to as buying “mortgage points” or “discount points.”

When interest rates are low, on the other hand, few borrowers pay higher closing costs to get a discount.

But as mortgage rates rise, borrowers are more likely to weigh the pros and cons of buying points to reduce their rate. I’m linking to an article by Michele Lerner at The Mortgage Reports that explains this in depth…and I invite you to check it out.

Here are a few highlights and thoughts from her article…

Pros of Buying Down the Interest Rate

The biggest reason to buy down your interest rate is to get a lower rate on your mortgage loan, regardless of credit score.

Lower rates can save you money on both your monthly payments and total interest payments over the life of the loan.

In addition:

If your income is too low for you to qualify for the house you want, you may be able to afford the purchase price with a reduced interest rate and payment
If you can convince a home seller to pay discount points for you, buying down your interest rate may help you qualify for your mortgage loan
Since discount points represent prepaid mortgage interest, the cost is often tax-deductible (provided that you itemize your deductions). Ask a tax professional for more information

Cons of Buying Down the Interest Rate

The primary drawback when you buy down your mortgage interest rate is that it increases the upfront cost of buying a home.

Your monthly payments will be lower, but you need to “break even” for those saving to be worth it. That means you should plan to keep the home loan long enough that your total savings outweigh the upfront cost of buying points.

Buying mortgage points also ties up your liquid cash. You may have better uses for that money; for example, paying off high-interest credit card debt, making investments, or saving for future home improvements.

You may also want to use the cash to invest in assets other than real estate for diversification, to boost a college tuition fund, or to pad your retirement account.

Finally, if you’re making a down payment of less than 20% — or have less than 20% in home equity when refinancing — you’ll probably have to pay for private mortgage insurance (PMI) on a conventional loan. Thus, it could be best to use your cash for a larger down payment rather than buying points.

How Does a Mortgage Buydown Work?

Buying down your mortgage interest rate involves purchasing discount points (also known as “mortgage points”).

You’ll pay an upfront fee to the lender at closing in exchange for a lower rate over the life of the loan.

Most types of mortgage loans allow buyers to purchase discount points, including conventional, FHA, VA, and USDA loans.

The rate reduction per point depends on the mortgage lender and the type of loan. However, as a rule of thumb, a mortgage point costs 1% of your loan amount and lowers your rate by about 0.25%.

Let’s look at an example, using a $400,000 mortgage amount:

Original quote: $400,000 mortgage at 6.25%
One discount point costs $4,000
One point lowers the rate by 0.25% (from 6.25% to 6.00%)
Over 30 years at 6.25%, you’d pay $486,600 in total interest
Over 30 years at 6%, you’d pay only $463,300 in total interest
Extra upfront cost of buying points: $4,000
Savings from buying points: $23,300

The actual savings and interest rate reduction will vary depending on your loan and lender. Ask your loan officer to show you a few different quotes, with and without points, so you can understand how the potential cost and savings stack up.

Types of Mortgage Rate Buydowns

Mortgage rate buydowns come in a wide variety of options.

Here’s a summary of what you might find when you start shopping around for a mortgage rate reduction:

Permanent buydown: This buydown results in the interest rate being lowered by a certain percentage for the entire duration of the mortgage.
Temporary buydown: This buydowns typically results in a temporary reduction in the interest rate for a specified period, often the first few years of the mortgage term.
3-2-1 buydown: This option involves a more gradual reduction in the interest rate over the initial three years of the loan, with each year representing a different interest rate tier (e.g., 3% lower in the first year, 2% in the second, and 1% in the third).
Seller contributions: In some cases, sellers may offer to contribute to the buyer’s closing costs, which can be used to fund a buydown.

In Conclusion

Mortgage rates have recently fallen from their 2023 peaks. However, they’re still much higher than a few years back so paying discount points can help you save.

To see what you qualify for, give me a call and we can go through multiple scenarios. I can show you rate quotes both with and without mortgage points so you know how much you could save on your rate — and what it would cost you!

If you’d like to find out more and discuss the pros and cons of discount points, don’t hesitate to reach out to me!

Mortgage Rate Update – March 2022

March 22, 2022 / Tom Bonetto

white android tablet turned on displaying a graph

Mortgage interest rates just keep moving higher. They have risen nearly 1.5% points since January 3^rd… and it seems like almost every day rates move up again.

The outlook for lower rates isn’t great right now, thanks mostly to the Federal Reserve’s handling of the money supply and out-of-control inflation.

How will the Fed’s recently announced quarter point hike to the Fed Funds Rate affect mortgage interest rates? The answer may surprise you.

The Federal Reserve

The Fed Funds Rate is not the same as a mortgage rate because it can change from one day to another, while mortgage rates can be in effect for 30 years. More on that here….

Warning Sign Showing an Arrow Labeled Inflation

Mortgage rates are primarily driven by inflation, which erodes the buying power of the fixed return that a mortgage holder receives. When inflation rises, lenders demand a higher interest rate to offset the more rapid erosion of their buying power.

You probably know that inflation has been rising significantly of late, and as a result, so have mortgage rates. Inflation is pushing 9%, the highest level we’ve seen in over 40 years. This has moved mortgage rates into the mid 4% range this week.

Essentially, The Federal Reserve has bungled their management of inflation and now have to make severe changes to offset the damage. This brings market instability and increased mortgage rates.

When the Fed hikes rates, they are trying to slow the economy and curb inflation. If successful in cooling inflation, mortgage rates will decline. History proves this during rate hike cycles for the past 50 years. Unfortunately, this isn’t an overnight fix.

*Federal Reserve Chairman Jerome Powell*

However, the Fed may also reduce its holdings of Mortgage Bonds, which can cause some interest rate volatility. And if inflation continue to surge, the Fed might not be able to do much to help. The situation isn’t great at this moment.

30-year fixed mortgage rates

The average 30-year fixed-refinance rate is 4.53 percent, up 20 basis points over the last week. A month ago, the average rate on a 30-year fixed refinance was lower, at 4.17 percent.

At the current average rate, you’ll pay $503.13 per month in principal and interest for every $100,000 you borrow. That’s $7.08 higher compared with last week.

Mortgage Rates and Treasury Yields – a great barometer

Fixed mortgage rates and Treasury yields tend to move together because fixed-income investors compare the returns they can get on government and mortgage-backed securities.

Investors compare yields on long-term Treasuries to mortgage-backed securities and corporate bonds. All bond yields (including mortgage backed securities) are affected by Treasury yields, because they compete for the same type of investor.

Mortgages, in turn, offer a higher return for more risk. Investors purchase securities backed by the value of the home loans—so-called mortgage-backed securities. When Treasury yields rise, investors in mortgage-backed securities demand higher rates. They want compensation for the greater risk.

You can dig deeper by reading Kimberly Amadeo’s article here…

You can see the rise in the 10-year treasury yield here…and mortgage rates have been following a nearly identical course over the last 3 months.

Graph of Treasury Yield from Dec 27 to Mar 21

What Really Causes Rates to Rise and Fall?

Mortgage rates are determined by a complex interaction of economic factors, such as the level and direction of the bond market, including 10-year Treasury yields; the Federal Reserve’s current monetary policy, especially as it relates to funding government-backed mortgages; and competition between lenders and across loan types.

Because fluctuations can be caused by any number of these at once, it’s generally difficult to attribute the change to any one factor. Although in our current situation, inflation (and the Fed’s mismanagement of it) is the number one cause. When this is coupled with the large increase in government spending, you see a double dose of fear in the markets.

roll of american dollar banknotes tightened with band

In today’s case, the Federal Reserve has been buying billions of dollars of bonds in response to the pandemic’s economic pressures, and continues to do so. This bond-buying policy (and not the more publicized federal funds rate) is a major influencer on mortgage rates.

On March 16, the Fed announced that it expects to begin reducing its balance sheet in May, meaning it will start reducing the overall amount of bonds it owns. This will be on top of its existing move to reduce new bond purchases by an increment every month, the so-called taper, which began in November.

You can find out more here from Investopedia….

Most experts agree that this “taper” will also move treasury yields and mortgage rates higher.

Moving Forward

There may come a point when mortgage rates drop back down and borrowers can enjoy some of the remarkably low rates they were available from mid-2020 through late 2021.

And throughout 2022, we could have periods when rates dip to some degree.

But for the most part, borrowers may need to come to terms with the fact that the days of record-low borrowing are behind us.

With that said, it’s important to put today’s rates into perspective. Compared to the rates we saw from mid-2020 through the end of 2021, the rates above look high. But historically speaking, locking in a 30-year mortgage anywhere in the 4% range is not a bad deal at all.

Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s market. It would be my pleasure to help you!

Tag: mortgage (Page 1 of 3)

Waiting to Purchase a Home Can Actually Be More Costly

Rising Home Prices

Missing Out on Equity Growth

Renting Costs Add Up

Limited Housing Inventory

In Conclusion

Now Is the Time to Apply for a Mortgage – Mid-March 2025

What’s Happening in the Market

Why Do a Mortgage Application Now?

What This Means for Would-Be Buyers

The Bottom Line

The Fed Has Finally Cut Its Federal Funds Rate. Now What?

Why So Long?

What Does That Mean for Mortgage Rates?

Today’s Actions

Housing Pricing Pressure Ahead?

The Bottom Line

Should You Buy Down Your Mortgage Interest Rate? | Pros and Cons

Pros of Buying Down the Interest Rate

Cons of Buying Down the Interest Rate

How Does a Mortgage Buydown Work?

Types of Mortgage Rate Buydowns

In Conclusion

Mortgage Rate Update – March 2022

The Federal Reserve

30-year fixed mortgage rates

Mortgage Rates and Treasury Yields – a great barometer

What Really Causes Rates to Rise and Fall?

Moving Forward

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