The Coronavirus has affected every American's daily life, but did you know that it has also had an effect on the real estate market? Mortgage rates started falling weeks before the Fed’s first rate cut of the year, on March 3. With that rate reduction of half a percentage point, the Fed was attempting to ease the market. Then, on March 15, the central bank announced another rate cut of a full percentage point. This cut to mortgage rates is designed to stimulate the economy when the worst of the pandemic passes and people are able to get back to work.
Benefiting from Lower Rates
What does this mean for home buyers? Essentially, homes will be more affordable. The only downside to this is that more people will be looking to take advantage of these rates—therefore there will be more buyers than the current inventory of homes. This competition is healthy for our economy. In order to stand out among this competition, be more proactive than reactive. This means getting a mortgage pre-approval earlier rather than later. A pre-approval letter gives sellers confidence that you’ll be able to get a loan and that the sale will go through. You should also limit contingencies, such as requesting that the seller make repairs or pay your closing costs. Paying closing costs and forgoing repairs for a year or two is a small price to pay to get the home of your dreams. If possible, let the seller know that you can be flexible about the closing date. This is also great news for home sellers, who are more likely to get multiple offers on their property.
These cuts are also a great chance for homeowners to refinance their loan. However, lenders are enduring heavy workloads. By submitting a complete application, with all the necessary documentation, you can help alleviate some of this load and improve your chances of getting refinanced before rates go back up. Online applications usually will let you know if you haven’t provided all the necessary documents. If you have any questions about how cuts to mortgage rates could help you get into a new home, talk to your agent today. Your agent can also help you figure out what documentation you'll need to get refinanced. Remember, despite the crisis due to the Coronavirus, your agent is still there to help in any way that they can.