After hovering between 6% and 6.25% for the past two months, rates dropped by around .75%. According to my friend, Cameron White Ford from the local Boulder office of Countrywide Home Loans, borrowers with excellent credit can now get a loan at 5.375%. That would save a borrower $112/month on a $200,000 mortgage compared to a loan at 6.25%. The reason for the drop is summed up in this article from CNN Money. But in a nutshell, the drop is due to the recent announcement from the Federal Government that they will pump another $800 billion into credit markets to free up frozen consumer credit and mortgage lending.
Finally, some good news for homeowners and home buyers. If you are considering buying, that extra money will certainly help, but it is also great for homeowners who may want to take advantage of the rate drop and refinance their current mortgage.
If you are looking to refinance, make sure you get the details from your lender about your expected closing costs. Most lenders will pay the some of the closing costs for you, so don’t feel shy about asking what costs they will pay or waive to get your business.
Consider how long you plan to stay in the home too. Compare the monthly savings to the total costs to figure out how many months it will take to make your closing costs back. For example, if your total closing costs are $1200 and your savings is $100 per month, it will take you 12 months to make back the closing costs, so if you will be in the home for anything over 1 year, you come out ahead.
The lower rate will also make it easier for home buyers to qualify and afford a new loan too. If you are planning to stick around for at least 3 or even better 5 years, this could be a good time to buy since home sellers are more motivated than in recent years.
blog by elephant’s favorite realtor, Liz Benson