Be Prepared: How to Lock Historic Low Mortgage Rates, From an Eagle Scout

Be Prepared

As an Eagle Scout, that was our motto. “Always be prepared.” I inform all clients to “be prepared,” especially in a market like this. Either to re-finance and always be prepared if they are looking to buy a property because it’s not always the highest offer the Seller choices to accept. In the Post-COVID market, Sellers are looking for buyers who have a pre-approval letter, funds ready to go and will consider the likelihood of any buyer’s ability to actually close.

Mortgage Rates

Mortgage rates have dropped this week to an average 3.15% for a 30-year fixed-rate home loan, from last week’s 3.24%, Freddie Mac reported on Thursday.

“The 30-year fixed-rate mortgage has again hit the lowest level in our survey’s nearly 50-year history, breaking the record for the third time in just the last few months,” says Sam Khater, Freddie Mac’s chief economist. The survey rates come with an average 0.7 point. Last year at this time, the typical rate on a 30-year fixed mortgage was a steeper 3.99%.

The benchmark mortgage rate hasn’t gone any higher than 3.33%, on average, since the beginning of April, and Freddie Mac predicts rates will stay low but harder to find. The firm is forecasting that 30-year mortgage rates will average 3.3% during 2020, way down from last year’s 3.9%.

My personal research directly from the top lenders in the nation all predicted that average rates “may slide under 3% by the end of the year,” and some sub-3% rates are already out there. You just have to know where to find them and BUT BE PREPARED WHEN YOU DO. Act now because you won’t find those rates for free.

Consult an Expert & Begin Improving Your Credit

My advice for all buyers is if you are looking to buy in the next 30-180 days to contact an expert immediately. Start by improving your credit immediately, which is not a science but more of an art. My personal tips are:

• NEVER close a credit card, most lenders like that you have access to credit and for long periods of time. Ideally, you want to use them but pay them off monthly. For example I have a $30,000 limit on one card. We charge everything we can on it, but we pay it off in full every month.
• Pay your bills on time. Your payment history will be reported to the credit bureaus. Delinquent payments are one of the most important factors on your credit report.
• Keep your credit card balances low. A high debt-to-credit ratio (utilization rate) is a sign that you are overextending your use of credit.
• Do not open any new accounts, unless it is needed. If you plan to open a new credit account for additional spending power or even to attain a better credit mix, be careful. Opening new credit accounts adds hard inquires to your report and could ultimately result in more debt than you can afford to repay, both of which could negatively impact your credit.
• Pay off excessive credit card debt. This can have a positive result on your credit. On the other hand, if you close unused accounts, it could lower your credit scores because you lose the credit available on those accounts, making your credit balances a greater percentage of your available limits. My wife made this mistake by closing a card we never used but was open for 15 years, and it negatively impacted our score. It was an innocent thought, “why do we even have this card?” but it cost us money because we were buying a home. So please read this with any significant other or partner.
• Check your credit report. Check to make sure that the amounts owed and your payment history are correctly listed. If any errors are found, you can dispute them with the credit reporting agency. You are allowed access to your credit report for free once a year from all the bureaus go to their website and request it online. Calling is NOT recommended. (I was on hold for 8 hours, took 10 mins online)

COVID UPDATE:

This is a game changer. These 6 points are the usual items but now pretend you are a lender and lending a person money today. Put yourself in the lender’s shoes. Wouldn’t you probably be a little more stringent? Is the person employed? How much savings do they have? Can they afford 3 months of payments if their company decides to furlough or close down? Why did they apply for a new credit card?

Last but not least, we all see these rates advertised at 3%, but usually that’s for only a perfect profile.

Start Preparing Now

This is the point of this post! Start preparing now, to get those rates, talk to a reputable lender with a long track record, if you would like my top 3 which I have used and recommend daily to clients, I will gladly give you their information.

But, being prepared and getting your financial house in order will allow you to be ready to buy and have the best offer and one that sellers appreciate, and may accept it even if it’s 5% below another offer or $50,000 below.

My background includes a lot of financial analysis projects. I don’t work for a credit bureau or a lender but after closing 1,000s of transactions… I have learned a few things, and hopefully this will help you save money by getting a lower rate and helps you understand how a lender is thinking.