After the Federal Reserve’s decision in late July to lower interest rates, there was an immediate and dramatic impact on the mortgage market as many families moved to take advantage of the new rates.
In the week following the rate cut, new mortgage applications skyrocketed as many families decided that now was the time to buy and to take advantage of the opportunity offered by lower rates. Volume rose 5.3%, according to the Mortgage Bankers Association’s seasonally adjusted index — 46.5% higher than a year ago, when rates were significantly higher.
Should I Refinance?
Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance: to obtain a lower interest rate; to shorten the term of their mortgage; to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa; to tap into home equity to finance a large purchase, or to consolidate debt.
Refinancing Has Big Benefits
One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.
Other Benefits of Refinancing include:
Is It a Good Time to Buy a Home?
Find Out About Down Payment Assistance Programs
Many local and state governments, as well as most major lenders, offer programs to help people purchase their first home. In addition, down payment assistance grants provide homebuyers with down payment and/or closing cost funds that don’t have to be repaid.
Down Payment Resources is a great tool that let’s you know about programs in your area. Examples of other nationally available down payment grant programs include the nonprofit National Homebuyers Fund, which gifts homebuyers with up to 5 percent of the loan amount, and the Dream Makers Military Heroes Fund from the PenFed Foundation, which offers up to $5,000 in down payment grant money to qualified military members.
Seek Free Advice from a Nonprofit Housing Counselor
HUD-approved nonprofit housing counseling organizations – such as credit.org and Money Management International — offer prepurchase counseling and online education courses to help first-time homebuyers understand the home buying process. These organizations have plenty of dedicated counselors that can help anyone prepare for homeownership.
Check Out This App
For the technology-savvy individual, HLP.Guru can quickly help anyone looking to buy a home. The app will analyze a person’s credit history and provide them with a forecast of their future credit score if they pay down debt or take other actions to bolster their finances.
The app also has a simulator to test different financial decisions to see how each may impact your financial health. Finally, a prospective homeowner has access to a "guru." These are nonprofit housing counselors that can help build a financial plan to buy and keep your home. To find out more, go to https://hlp.guru/
Mark Cole is Chief Executive Officer of HLP, a nonprofit mortgage technology company based in Baltimore. HLP’s web portal is a one-stop technology solution to help homeowners nationwide ensure that critical documents from distressed homeowners reach mortgage companies. To find out more about HLP’s services, visit www.hlp.org.