If you were looking for a great time to purchase or refinance a home, this might be it. Lower interest rates have caused the seller’s market to slow down, and historically low rates make this an attractive time to buy or look for better loan terms.

Let’s look at some of the main factors that may influence your decision:

• The chance to lower your monthly mortgage payment.

• A possibility to get a cash-out refinance on your home equity.

• The ability to refinance for a shorter term to pay off your loan faster.

• Looming threats of an economic downturn.

PMMS+ Indicates Historically Low Interest Rates

Freddie Mac’s 30-year Primary Mortgage Market Survey (PMMS) is published by the fhfa.gov site every month, starting June 2019.  Referred to as the PMMS+, this newly established index feeds from information made available by mortgage lenders and replaces the discontinued index that was used to measure outstanding loans. Looking at the index below, we see June through August rates in a declining trend. That can be great news for those looking to buy or refinance.

Qualifying for Home Equity

According to a recent TransUnion report, approximately 70 million homeowners may be eligible for an equity loan — including FHA Cash-Out refinance loans or reverse mortgages. The same report shows there is $14 trillion of home equity in homes throughout the United States indicating that while housing prices continue to rise, more people are likely to stay in their homes and take advantage of this equity.

If you decide to stay in your home, you could consider using the equity available to make upgrades that increase your home’s value. There are many loan types that let you refinance your loan to obtain extra cash to help make your home even more beautiful. A bonus is the renovations will likely increase the value of your home and can increase your equity upon completion.

Cash-Out Refinance Loans

Getting cash back gives you the freedom you need to make changes that you might not otherwise be able to afford like updating to your dream kitchen, adding an outdoor living area or even a wraparound porch. When you qualify for an FHA cash-out refinance, you have the freedom to choose how to use the money.

If it’s determined there is equity available and you think applying for an FHA cash-out loan may be right for you, take the time to list out your top reasons for needing the extra cash. This could be your chance to make the most of this refinance opportunity to put your equity to work and improve your repayment terms.

Timing Is Important

Some borrowers may choose to refinance for timing reasons. For example, some homeowners may have an adjustable-rate mortgage (ARM) for which a period of lower interest is ending, and a higher rate period is about to begin. It could also be a strategic move to get out the ARM into a fixed-interest loan at a much lower rate. This could save you thousands of dollars a year and give you a predictable mortgage payment for the life of the loan. Other borrowers may find a cash-out loan refinance attractive when they are nearing the end of the period for which they can draw on the HELOC. Before making that decision, here are some helpful questions to ask:

• Would an FHA cash-out help you pay off debt or fix up your home?

• Would the new loan include a lower monthly payment?

• How long do you plan on staying in your home? Would it make more sense to take advantage of low-interest rates?

These are all important questions, and you can add your own to help you decide among the available choices. 

Current State of the Housing Market

Inventory growth is now outpacing sales in a market that’s shifting to favor buyers. Overall, sales have declined by 5.5% versus 2018. 

Although home prices are still rising compared to a year ago, the gains are slowing considerably. Low mortgage rates are luring in more buyers who don’t want to miss the opportunity to save. 

Year over year sales were up from June to July, but the feeding frenzy on individual sales seems to have come to an end. Only 10% of Redfin offers faced a bidding war last month, according to the site. In August of 2018, that number was 400 times as high with 42% of listings resulting in a bidding war and driving up prices on new homes. 

With the supply of homes growing in the high and middle price ranges, many believe it may not be the ideal time to buy a new home. Once that trend trickles down to entry-level and lower priced homes, buyers may be able to snatch up a bargain in terms of interest rates and price. It could be tricky to pinpoint when that is with the recession potentially looming, so if you see a home you love, now might be the time to make an offer.

Sources

Wallace, Joe. “Reasons to Refinance In 2019.” Reasons to Refinance In 2019, FHA.com, 2019, www.fha.com/fha_article?id=1990.

Olick, Diana. “Fall Housing Shifts Quickly to a Buyer’s Market.” CNBC, CNBC, 9 Sept. 2019, www.cnbc.com/2019/09/09/fall-housing-shifts-quickly-to-a-buyers-market.html.

“Update on The Discontinuation of FHFA’s Monthly Interest Rate Survey (MIRS).” MIRS Transition Index | Federal Housing Finance Agency, Federal Housing Finance Agency, 2019, www.fhfa.gov/DataTools/Downloads/Pages/Monthly-Interest-Rate-Data.aspx.

Pollard, Joshua. “3 Reasons Why Now Is The Best Time To Refinance Your Mortgage.” Forbes, Forbes Magazine, 28 Aug. 2019, www.forbes.com/sites/joshuapollard/2019/08/28/3-reasons-why-now-is-the-best-time-to-refinance-your-mortgage/2/#6edcb174771c.

Lerner, Michele. “Ways to Cash in on Your Home Equity and the Tax Implications of Doing So.” The Washington Post, WP Company, 18 May 2018, www.washingtonpost.com/realestate/fueled-by-rising-prices-americans-home-equity-hits-a-record-144-trillion/2018/05/16/8eb29c2a-4e1a-11e8-84a0-458a1aa9ac0a_story.html?noredirect=on.

Lloyd , Alcynna. “Inventory Growth Is Now Outpacing Sales in Buyer-Friendly Housing Markets.” HousingWire.com, Housing Wire, 4 June 2019, www.housingwire.com/articles/49256-inventory-growth-is-now-outpacing-sales-in-buyer-friendly-housing-markets/. “United States New Home Sales.” United States New Home Sales | 2019 | Data | Chart | Calendar | Forecast, Trading Economics, 2019, tradingeconomics.com/united-states/new-home-sales.