Uh oh… rates are finally dropping but there are problems in refi land!
The problem has to do with first-time homebuyers getting much lower rates than everyone else – when they buy.
I have blogged about this many times, but there are numerous adjustments to everyone’s interest rate for such things as loan-to-value (down payment %), credit score, property type, etc.
All of the factors that impact someone’s rate are set out in this blog: 14 Factors That Impact Your Mortgage Rate.
BUT – many of these factors are now ignored for first-time homebuyers – and the “problem” is that those factors ARE NOT ignored for refinances.
What that means is that rates will have to fall that much further before it will make sense for a first-time homebuyer to refinance.
The good news is that many macro analysts think rates will definitely fall far enough for first-time homebuyers to refi – particularly when the commercial real estate market implodes (tomorrow’s blog).
Every day, the emailed version of this blog includes a rate quote for a 5% down purchase scenario with the following assumptions: $750,000 price; 680 Credit Score; condominium.
With today’s quote, for that scenario, the rate is 1.25% LOWER for First Time Homebuyers than it is for “non-first-timers.”
So, given that rates are already THAT MUCH LOWER for first-time buyers, you can see why they have to fall that much farther for first-time buyers to refinance (because first-time homebuyer benefits ONLY come with purchases; not with refinances).
But again, it seems likely that rates will fall far enough. And, we are already spotting refi opportunities for our many non-first-timers who have purchased over the last year or so.
JVM’s Rate Drop Free-fi™
As a reminder, we closely monitor ALL of our past clients’ interest rates and we will be the first to contact them with refi opportunities, so they can take advantage of JVM’s Rate Drop Free-fi™.
Lastly, I want to give a shoutout to my friend John Downs, a superstar loan officer with an excellent X (aka Twitter) account that I highly recommend following. This topic was his idea, as he brought it up last night with this thread on X.
