Lower rates help buyers in Vail Valley
As pretty much everyone has heard, mortgage rates have dropped to record lows, at least for conforming loan balances. Loans up to $417,000 are generally starting below 5 percent and between $417,000 and $625,500 (the previous cap was $729,750) are in the low 5 percent range.Compared to recent rates this year, these changes can save you hundreds of dollars each month. Consider a loan of $417,000, which for several months earlier this year might have cost you a rate of about 6.25 percent and now might be had for 4.75 percent (although rates fluctuate sometimes several times a day).At 6.25 percent your monthly principal and interest payment (P&I) would be $2,567 a month. At 4.75 percent your payment would be $2,175 a month. That is nearly a $400 monthly savings and if you kept the loan for 30 years, would mean almost $144,000 in savings.Unfortunately, rates for jumbo loan amounts (those over $625,500) are still pretty expensive, though not nearly as much as recently.Many things have changed in terms of getting a mortgage loan from even six months ago. For starters, be ready to show your tax returns and fully disclose your assets. The days of low documnetation loans are gone.Also gone are the days of low-cost or no-cost loan closings. In the past (even a month ago) lenders made enough of a spread when they sold their loans to secondary investors that a higher rate would allow them to eliminate fees such as the 1 percent origination fee. Traditionally, if you were willing to pay one-quarter percent extra on your rate you could eliminate a traditional 1 percent origination fee. That made a lot of economic sense for a lot of borrowers.For the time being the spread simply is not there and you should expect to pay the origination fee. To eliminate it lately would cost you about a full percentage point to the rate.Your rate might also be impacted by what is known as risk-based pricing. Elements such as loan-to-value, credit score, occupancy and property type all impact mortgage rates these days.If you are planning to shop for a property it is a good idea to visit with a lender first to determine what financing options are available to you. You can then confidently shop till you drop for that perfect home, knowing what you can qualify for and what the down payment and loan terms will likely be. Going in prepared will make your home shopping far less stressful.It is a buyer’s market right now in most parts of the valley, and the low rates can give you an edge in finding the home that is right for you.Chris Neuswanger is a loan originator with Macro Financial Group in Avon and can be reached at 970-748-0342. He welcomes mortgage-related inquiries from local readers.