The Fed’s Move & A 1% Down Mortgage
June 20, 2023
The Fed’s Move & A 1% Down Mortgage
The late, great General Colin Powell once said that indecision has cost the American people more than a wrong decision. Well, another Powell’s (in)decision to pause rate hikes instead of continuing on the strategy that has proven effective reducing inflation will cost Americans more in the future than it will now. Continuing to raise .25, like before, would continue the economy on a consistent pathway to inflation reduction without risking it becoming permanently ingrained in the economy. Not that they haven’t made progress already, but pausing before hitting the 2% inflation target is like prematurely quitting an antibiotic regime just because you feel a little better even though you’re still sick.
The market is driven by confidence and fear, certainty and uncertainty.
In the past the market has rallied when the Fed has either dropped or paused rates. But after the Fed’s announcement the Dow tanked over 250 points due to two more announced hikes, and hasn’t rallied back since. With a labor market stronger than expected the Fed has more leverage and political capital to continue raising in the future when they should be getting it over now. Instead, they’re kicking the can down the road which will come back to haunt them in an election year.
The Fed’s pause had no effect on mortgage rates either with the average 30-year fixed mortgage rate still sitting around 7% (Bee’s rates are much lower than this). As a result, many home buyers continue to hold off on buying by waiting for rates to come down. This buying hesitation is costing them money in the long run by wasting it on rent instead of building equity in their own home.
30 year fixed
$250,000 loan amount
$1,663/mo @ 7% interest rate
$1,499/mo @ 6% interest rate
= $164/mo or $1,968/year difference
If you’re paying $2,000/mo in rent that’s $1,836 you’re wasting on rent as you wait for rates to drop.
$1,836 x 12 months = $22,032 per year you could be saving in equity in your home instead of wasting it on renting and building up someone else’s home equity. This is why it doesn't make sense to wait for rates to come down. Buy wherever rates are when you’re ready to buy and refinance if they drop in the future.
Not that this hasn’t happened before–but it is happening more often now than ever before–but the recent market has been crazy with multiple rate changes happening per day.
These unexpected rate swings in the picture below are in the span of a little over an hour. Uncertainty is causing wild movement in the market as lenders don’t know what to expect day-to-day, and are trying to hedge their rates and margins to ever-changing data.
Home buyers should be aware of how unpredictable the market is, and how quickly and abruptly rates can change. Mortgage brokers don’t control rates. Brokers and home buyers are at the mercy of whatever the lender puts out, which is in a large part based on the 10-year Treasury, the Fed, and market forecasts (among others things such as loan volume and production capacity). And while there are a few tools some mortgage brokers can use to bring down a rate at no cost to the borrower, home buyers should take heed that the Fed is planning on raising rates two more times this year, which will drive the 10-year Treasury and mortgage rates higher.
Nobody wants to hear this, but the days of low mortgage rates are over.
Historically however, rates are still low so perspective is always important to have, along with a healthy expectation of where the market is, and where it isn’t. Deals can still be found depending on where you look. If you don’t find the home of your dreams at first, broaden your search, or look for a home that has a low-rate mortgage that’s assumable. Considering how much money you waste on renting should motivate you to compromise on some small things in order to enter the market and start building equity in your own home.
As a result of the Fed’s actions an intense market downturn is inevitable and the bottom line is the Fed has made the problem worse, by making it longer and more difficult than it needs to be.
Bee Launches a 1% Down Loan For First-time Home Buyers
While many lenders continue to struggle in a tough mortgage market, others are focusing on bottom-line savings for their customers with new, innovative loans that allow first-time buyers to easily enter the market regardless of the higher rates.
Bee is working with the #1 lender in America who is setting aside $20 million per month to help Florida first-time home buyers get into their dream homes!
In an effort to combat inflation and higher interest rates while improving homeownership affordability, Bee is now offering a 1% down payment mortgage for Florida home buyers. Qualified borrowers get the down payment advantage at no additional cost to them, and can get up to $4,000 or up to an additional 2% down payment to total 3% in order to qualify for a conventional mortgage.
$150,000 purchase price
$1,500 borrower paid down payment
$3,000 down payment assistance
= $4,500 total down payment (97% LTV)
Since COVID, home prices in Florida have skyrocketed putting a pinch on first-time buyer’s wallets. However, with the new 1% down loan with the down payment advantage, home buyers can still use other gift funds and down payment assistance programs to cover the entire down payment. Along with seller credits, a first-time buyer could easily buy a home with very little money out-of-pocket at closing.
Did You Know?
Using a mortgage broker is the cheapest way to get a mortgage, and HMDA data proves it. HMDA stands for the Home Mortgage Disclosure Act and requires financial institutions to track loan-level information about mortgages ensuring companies are operating in good faith and fairly. Consumers who use a mortgage broker instead of going directly to the lender save $9,400 over the life of the loan ($10,400 for minorities). Home buyers get a lower rate, lower fees, and excellent, personalized service from start to finish when they work with a mortgage broker.
Longboat Key, Sarasota Florida
In an upcoming blog post we’ll discover Longboat Key off the coast of Sarasota, Florida! This remarkable beach paradise will give you every reason to make Florida your permanent home!
If you’re ready to make the leap into homeownership, contact us today! Our dedicated loan experts will walk you through every step of the way ensuring you get a low rate and close quickly!
If you’re looking for a streamline refinance to lower the rate and payment, apply here today or call 855-626-1999 and speak with one of our expert loan officers in your area!
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