Why Is My Client’s Rate So High?

    That is a question we have heard from several agents over the last week.

    The primary reason is usually just a misunderstanding of just how much rates have risen over the last month – almost 1%!

    I have included a screenshot of The 30-Year Fixed-Rate Mortgage Chart from Mortgage News Daily at the bottom of this blog to provide a powerful visual illustration of the recent rate increases.

    Long story short: Mortgage rates bottomed out at 5.99% on February 2, and are now just under 7%.

    There are a few other reasons agents are sometimes surprised by the rates we quote too – even though our rates tend to be much lower than our competitors’ overall.

    1. Buyers Do Not Qualify for First-Time Homebuyer Waivers. Fannie Mae recently made rates way lower for first-time homebuyers, BUT they have to qualify by avoiding certain income limitations and by actually being first-time homebuyers. If buyers do not qualify for the “waivers,” their interest rate can be much higher for various reasons, including a lower credit score, a smaller down payment, or a condo purchase (as condo financing comes with higher rates in most cases).
    2. Agent Specializes In VA, FHA, or Jumbo Markets. VA, FHA, and jumbo loan interest rates tend to be much lower than conforming (Fannie Mae and Freddie Mac) rates. Hence, if an agent is used to exclusively working with buyers who are in the VA, FHA, or jumbo realms, she will often be surprised to see a Fannie Mae rate quote – even if the quote is very low from a competitive perspective.

    In any case, these are all important reminders for agents not only so they are not alarmed when they see rate quotes, but also so they can help us explain this to our mutual clients.

    Are High Rates an Opportunity for Buyers?

    Our friend and resident-rate-guru Barry Habib says that high rates most definitely are an opportunity for buyers for two reasons: (1) higher rates push many buyers out of the market which makes the market’s new homes far less competitive; and (2) buyers will be able to refi later this year into a lower rate when interest rates fall.

    And Barry remains 100% convinced that rates will fall. Rates rose so much over the last month because investors were responding to strong jobs data and higher than expected inflation reports.

    Mr. Habib, however, reminds us again and again that the jobs and inflation data that investors are reacting to “lag,” and do not reflect actual market conditions.

    When more accurate jobs and inflation data inevitably surfaces, rates will fall.

    Mr. Habib has not failed us in years with his predictions, so we will continue to believe him and let our clients know that higher rates really do create an opportunity to buy.

    Jay Voorhees
    Founder | JVM Lending
    (855) 855-4491 | DRE# 1197176, NMLS# 310167

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