Brighter outlook for home buying in 2015
There has been an unexpected dip in mortgage rates, sparked by a slide in oil prices and bond yields, plus strong employment reports. In Chicago, borrowers who shop around now may be able to lock in a 30-year fixed mortgage in the 3.5 percent to 3.625 percent range, and 15-year fixed loans at 2.75 percent to 2.875 percent, experts say. These are great deals, when you consider that home-loan rates have averaged about 6 percent over the past two decades.
It’s no wonder that mortgage applications in early 2015 have skyrocketed. The Mortgage Bankers Association reported that application volume increased 49 percent for the week ended January 9th. Meanwhile, applications for mortgage refinances zoomed 66 percent from the previous week to the highest level since July of 2013.
Before the recent rate declines many bankers, lenders and borrowers had expected the Federal Reserve Board to start pushing home loan rates higher by mid-2015.
However, global economic uncertainty has sent the Wall Street stock market on a roller-coaster ride, forcing investors to flee to the safety of U.S. Treasury bonds. The higher demand for government bonds has caused their yields to drop, pushing long-term rates lower.
While most big banks still require borrowers to have a FICO score of at least 740, some smaller lenders are beginning to bend the requirements and are offering loans to borrowers with credit scores as low as 620. However, these lenders are charging higher interest rates and requiring larger down payments on these risker loans.
Another boost to first-time mortgage hunters is the new policy of mortgage giants Freddie Mac and Fannie Mae to allow creditworthy borrowers to buy a home and place a down payment as little as 3 percent, instead of the traditional minimum of 5 percent for a conventional loan.
So, if you are yearning to buy a new home or condominium in 2015, or want to refinance an existing loan, this winter likely is a great time to start seriously shopping for real estate and mortgages. Spring may be too late!
Excerpted from Don DeBat’s January 21, 2015 column in Inside Publications.