You’ve probably heard a lot lately about the economy, the Federal Reserve, and lower interest rates. Right now, mortgage applications and refinancing are being overwhelmed with demand. Meanwhile, more and more people are temporarily losing income and avoiding spending. So the economy has been shaken hard. Everyone is trying to help the economy without getting hurt or causing more damage in the process. But there is a silver lining – as a consumer, some of these attempts to help the economy could end up working well in your favor. Of course, no one can predict exactly what will happen, but several recent changes are giving 2020 a brighter outlook for consumers in the next few months. And home mortgages could be one of those things that improves in your favor. By the time the economy stabilizes again, you may find that you’re in a great position to afford a mortgage on a new home in Utah that you might not have had the funds for a year ago. Here’s why: COVID-19, Rate Cuts, and You With the coronavirus spiraling the globe, economies have been crashing globally. Everyone is scared, and it reflects back on the economy. As a result, a few things have happened that affect you as a consumer looking for a home mortgage. First of all, the 10-year Treasury yield has dropped to just under 1% as of March 20, 2020. The 10-year Treasury yield factors heavily into bank mortgage rates, and when it drops, mortgages do too. That’s great news for you as a consumer. But it doesn’t stop there. With widespread fear and expanding quarantines affecting many in the United States population, the Federal Reserve made a surprising decision on March 15, 2020, to cut their rates to 0%-0.25%. Though the Federal Reserve doesn’t affect mortgage rates as directly as the 10-year Treasury yield, the combined drop of the Treasury yield and the Federal Reserve interest rates should bring lower interest rates on mortgages over the next few months. This isn’t the first time the Federal Reserve has slashed its interest rates in the past year. Gradual drops began back in July 2019, and have continued since then. You can read more about why those rate cuts have been historic and how the Federal Reserve affects your mortgage rates in this article. The Federal Reserve has received significant backlash since this most recent rate cut, but in the long run, there’s a good chance that this change could benefit you when you apply for a mortgage in 2020. After reading all of this, you might be tempted to run out right now to apply for a mortgage, but pause before you do so. Applying for a mortgage and purchasing a new home in Utah are not things to rush into blindly. Besides, it’s important to remember that the effects of these interest cuts and yield drops could take a couple of months to fully roll out. To help you know the next steps you can take if you’re thinking about buying a new home, we’ve put together a list of things you can do now to get ready to apply for a mortgage in a few months. 3 Things You Can Do as a New Homebuyer in Utah to Take Advantage of Low Rates Determine Your Price Range Getting a good mortgage means doing good preparation. And one of the first things to consider is what price range you can afford for your new home in Utah. This is a good thing to start looking at now. Because it might take a bit of time for the effects of the Federal Reserve rate cuts and the 10-year Treasury yield drops to reach your mortgage rates, it’s better to step back and consider your spending abilities at this time before deciding to apply for a loan. Take into account a few things as you consider your potential price range: How much income do you typically have? How much income do you have right now? Or has COVID-19 affected your income? Do you have a functional budget? What is your credit score? How much money do you need to keep on hand so you and your family can live comfortably? How much money can you put into a downpayment? How much money do you have available to pay fees on the mortgage and home? Do you know if there are loans you could qualify for? What about loans for veterans or rural communities? When assessing your financial situation with questions like this, take everything into account to determine a realistic price range for your future home. And make sure to leave yourself some cushion room in case anything costs more than you anticipated. Look for Homes That Fit Your Price Range Once you know the price range for your future home, start searching for potential homes that fit your needs and your price range. This can be a slow process, so don’t rush through it. Take the time to determine if the homes you’re looking at are high-quality because a home in poor condition can cost a lot more in the long run than a high-quality home will cost upfront. A good place to look for potential new homes in Utah is in the Holmes Homes communities. We have communities all over Utah, and you can have the option to build or buy a move-in ready home in most of our communities. While you look for potential new homes, you’ll want to start comparing mortgages as well. Start “Shopping” Around for Potential Mortgages As mentioned, it may take time for the effects of the rate cuts and the yield drops to hit their full effect. But a positive result of that is that interest rates are likely to stay low for the rest of 2020. This gives you plenty of time to shop around and look for your best options. But to give you an idea of where current rates might be, consider this: As of the writing of this article, the benchmark 30-year fixed-rate is 4.05% and a 15-year fixed-rate is 3.39% according to Bankrate. Visit Bankrate to see the current benchmarks as well as a comparison of rates between various banks. When you find a mortgage that fits your needs and you have a potential house in mind, try to get preapproved for your mortgage before making an offer on the home. It’s reassuring to the seller to know that you already qualify for a loan even if it isn’t fully approved yet. These are some steps you can be taking now to take advantage of lower interest rates on the way. And they’re pretty similar to what you do when mortgage rates are high as well. The thing to remember is that even though lower interest rates are a benefit to you, you don’t want to rush into them. Do the process right, and you’ll end up in your new home with a great mortgage in just a few months. Holmes Homes New Homes in Utah Holmes Homes has been building quality homes for five generations now. We know homes better than anyone. With communities in Daybreak, Draper, Herriman, Layton, Park City, St. George, and more coming, we’re confident our homes will meet your needs. Contact us today at info@holmeshomes.com.
