How Long Will Rates Remain Low?

About a week ago I posted that rates for home loans went down by about 2%. This means that at the beginning of December of 2023, a loan that would have cost you about 7.5%, today you could get it for about 5.5%.

That is a HUGE difference!

There is a caveat though: this applies to a home where you are going to reside as your primary residence and, normally, for a loan amount no greater than $766,550.

In loans, broadly speaking, you have two worlds: the "government-sponsored world" and the rest.

Government-sponsored means that your mortgage is eventually going to be financed by the Federal National Mortgage Association (FNMA) colloquially known as "Fannie Mae" or through the Federal Home Loan Mortgage Corporation (FHLMC) colloquially known as "Freddie Mac".

These mortgages have many restrictions, rules and usually business owners or self-employed professionals—i.e. our clients—have trouble obtaining them.

For investment properties, for other ways of qualifying besides using Tax Returns, Rental Properties or Advanced Mortgages, the rates are about 2% higher, more or less, than what Fannie Mae or Freddie Mac offer. 

The good news is that the Advanced Investment Mortgages that used to be in the 8% to 8.5% range as of beginning of December 2023, are now in the 7% to 7.5% range.

These advanced mortgages are financed by wall street investment money rather than government sponsored. Their rules are much more flexible, and their loan programs cover almost any possible scenario. 

Before I give you the substance of this e-mail, allow me to give you a few more pieces of information:

1) The Garment Industry is a leading indicator as to what may happen in the economy in the future because they work one year ahead. Garments are produced a year in advance - my family used to be in this business, I grew up in it. My clients in the Garment Industry are telling me that a recession is coming - they already see it.

The relevance of this information is that when the economy tightens, mortgage lenders become more restrictive in their lending practices. So in essence, mortgage lending becomes more cumbersome and scarce - it is harder to get approved for a mortgage.  

2) The lead economist that we follow is forecasting a recessionary period too, reinforcing the above.

And finally,

3) Because the Economists that work for Fannie Mae and Freddie Mac do not take into consideration International Events, they reached a consensus that rates should come down. 

And they have, for now...

As soon as the International Events start encroaching, the Fed is not going to be able to control them, and rates will continue their upwards trend into the double-digit territory which we have not seen since the 2000s.

Sadly no one wants to be "politically incorrect" or "negative,” so no one will tell you the above. 

The reason I tell you this, is not to be negative, but rather to invite you to take advantage of the few months we have left of these low rates and use this window of opportunity for your own benefit! 

How long is this window? our sources indicate that these International Events should begin kicking-in around May 7th.

However, the mortgage business is a moving train. Rules, guidelines, rates, everything changes on a daily basis. It took just a couple of days to go down from 7.5 to 5.8% then another week into 5.5% for Fannie or Freddie loans.

As soon as the mortgage industry gets a whiff of what is really happening, in a matter of hours this window of opportunity may close.

However you will be OK because you will have a low fixed rate mortgage! No matter what happens, a mortgage is a contract that cannot be repudiated! 

If we are heading into a recession why should you buy anything? I will answer that in an upcoming Blog Post. It will detail a real experience one of my customers had where he was able to pay off his home at a great discount thanks to the worsening of the economy! 

A loan takes 30 days to process, if you start in March, you still have April as a buffer before the SHTF.

I have already witnessed this type of implosion in the Mortgage Industry back in 2006-2007. I am trying to give you this information as straight as I see it.

What if I am wrong? Then you benefit even more! What if I am right? Then you save yourself a bundle!

So either way, you benefit!

If you have been thinking about buying a property, refinancing a property, getting cash out for your business or to remodel, now it's the time! 

It costs you nothing to run a scenario of how it would work for you. You can self-schedule an appointment here.