The mortgage world is crazy these days. My clients have so many questions on how to finance that first house, upsized house, or downsized house. This week I’m thrilled to present the expertise of Carol Core to help make sense of the mayhem.
Kristi: Everyone who bought a house in the last year is counting the days until they can refinance to a lower rate. In general, how much does the rate have to drop from your current one to make a refinance worthwhile?
Carol: Usually 1.00 – 1.5 points lower. (Example) If your current interest rate is at 7.50%, you would want to wait re-finance until the rate drops to 6.00 – 6.25%. It depends on the value of your loan, but this drop could save you $200 – $350 per month on your payment. . . . and, that savings could off-set the higher costs of homeowner’s insurance/ property taxes.
Kristi: Are there any little-known mortgage products that can make payments more affordable during higher interest rate periods?
Carol: In this last year of higher interest rates, I have often times used down-payment assistance for clients, even if they came to the closing table with their own money, because DPA rates have been less that regular interest rates. So, in this situation we were able to lock the buyer at a lower rate, while also getting them additional funding.
Another option isn’t really a mortgage product, it is more of a strategy to use when you are dealing with higher rates. It is called a 2-1 buydown. The buyer asked the seller for a concession (a credit) that actually pays the difference in payment each month for a total of 24 months (first 12 is a 2% lower rate difference , next 12 months is a 1% lower rate difference). This helps the buyer through the higher rate period, and is not a very expensive option for the seller. Win-win!
Kristi: What are the top 3 mistakes to avoid when trying to qualify for the best mortgage rate?
Carol: I guess I would say 3 mistakes to avoid are
1 – always pay any debts you have on time and at least the minimum monthly payment due;
2 – don’t max out the available credit on credit cards (example) $1000 available credit, only use up to $500 of available credit to better your credit scores;
3 – the lower your debt-to-income ratios, the better you rate.
Also, “best rates” are usually associated with FHA loans. You don’t have to have the highest scores to get the “best” rate, however the down side is that FHA loans always add mortgage insurance to the loan. So, this is great loan for getting into a home but not the loan you want to stay in long-term. If you have money for a down payment and you have great credit scores (750 and above), that will usually align you will better rates, and potentially could eliminate mortgage insurance.
Carol Core, is a seasoned residential mortgage lender, helping clients for over 16 years. She and her team work on every kind of loan: Purchase, Refinance, FHA, Conventional, Down Payment Assistance loans, and specialize in Reverse Mortgage/ Purchase and hard-to-close loans. Carol loves helping people, especially first-time home buyers, who thought they might never own a home, and loves the more complex deals, that most lenders won’t take on. Carol was named a 5-star professional for 2023 and especially enjoys empowering women in the homebuying process.
Contact info: Carol Core, Core Safe Mortgage, 303-902-4378, ccore@coresafemortgage.com
Website: www.CoreSafeMortgage.com
