Current low interest rates are a boon to homeowners and prospective homebuyers alike. Even the so-called “experts” have been fooled the past few months as rates have been on a steady path downward. As with so many variables in the economy, there are plusses and minuses, winners and losers. Of course, those who are able to refinance their existing mortgage are clear “winners”. But do they have equity (which also has been improving in MI) and can they qualify under the new, stricter mortgage underwriting rules? Those with steady jobs and consistent earnings who have kept all bills current should have no problem. Self-employed folks or those who have experienced a layoff, conversion to part time or actual job loss resulting in lower pay may be out of luck. New federal laws require a very careful look at repayment abilities and with all the lawsuits resulting from the mortgage crises, lenders are in no mood to take a chance on someone with a new business or credit blips in the recent past. At Consumers, we are the exception. We have programs that are not based solely on a “FICO Score”, as we are able to determine a borrowers capacity on more common-sense factors.
Even though home values have been increasing in MI, appx 30% of all homes remain “underwater”, one of the highest rates in the nation. These folks must wait for home values to recover and play a waiting game on rates.
Also helping our rate picture is the current instability in Europe, which operates on a standard currency, the Euro. Thus troubles in one economy, like Greece, will spread to other countries that have better financial performance. We are benefiting from this situation as overseas investors buy our government debt which acts as a ceiling on interest rates. This will not continue forever of course, and I would expect rate increases in the US in late 2015. Now is a good time to act to lock in low rates or buy your first home!