A lot of potential buyers tell us they are waiting to a buy a home until Niceville mortgage rates fall even further. Statistically, bad economic news causes mortgage rates to fall and we’ve had plenty of bad economic news lately!
Based on statistics during bad economic times, we’d expect mortgage rates to fall even further than their already low rates (hovering around 5%). But, their not down near 4.5% or lower (without paying up front costs). The reason for this is three-fold.
First, many of the people once employed in the Niceville mortgage industry (about 70%) are now gone. With fewer employees like originators, underwriters, closers, etc….the remaining mortgage employees are flooded with larger workloads (mainly from refinancing). That means that premiums paid out to Niceville lenders have reduced and the lower the premium, the lower the mortgage rates tend to be. They do this to make Niceville mortgage origination more profitable and volume more manageable.
Secondly, when a Niceville lender originates a mortgage, whether for refinancing or a purchase, they pay a commission to a loan originator and his/her entire management structure. They also pat for underwriting, closing and to set up servicing of the loan after closing. With many people refinancing right now in Niceville, it is difficult to recoup upfront costs and begin making money before the mortgage is paid off through a refinance again. Because of this, Niceville mortgage lenders can pay less per loan also contributing to interest rates not being lower than they are now.
Lastly, mortgage lenders in Niceville have found an increase risk of default these days. Therefore, paying out large commissions (which typically drive down interest rates) becomes more risky because there is a greater chance that the mortgage will never get to the point of being profitable.
As you can see, if you are waiting for mortgage rates to go down to 4.5% with no upfront costs, you may never see it. With plenty of inventory out there, home prices being low, and fantastically low interest rates, the time to buy is now!