Are 30-year rates above 4% or not? Making sense of conflicting headlines

By Sabrina Karl

If you’ve been paying attention to recent mortgage news, you’ll know that rates have been on a tear since this new year began. In fact, the 30-year fixed-rate average breached 4% week, the first time it’s done so since 2019.

However, you may feel you’ve been seeing mixed signals in the news. If last week was so notable for breaking the 4% threshold, why did Freddie Mac report on Thursday that mortgage rates were only up to 3.69%?

Freddie Mac has been the primary mortgage rate reference for decades, and as such, its average is widely quoted in the media. Having tracked lender rates since 1971, Freddie Mac provides one of the best tools for historical reference, letting anyone see rates and trends for any period in the past 50-plus years.

However, Freddie Mac surveys lenders on rates just once a week. What it publishes on Thursdays is averaged from rates supplied on Monday, with a small proportion of lenders supplying Tuesday rates. In other words, Freddie Mac’s average largely measures weekly movement from one Monday to the next, and then published three days later.

In periods when rates are relatively stable, a weekly average that lags by 2-3 days won’t show much difference from a daily average measuring every weekday tick. But that’s not been the case in much of 2022, and especially last week. By the time Freddie Mac reported its average last Thursday, rates had moved dramatically upward since Tuesday. Had Freddie Mac’s average been calculated Thursday instead of Monday, the result would indeed have been much closer to 4%.

That’s not to say Freddie Mac’s average isn’t useful, as it does capture broad trends. Just understand that it’s primarily a Monday snapshot, so anyone needing more daily detail will want to search out sources.

Is your home retirement-friendly?

By Sabrina Karl

There’s no shortage of rankings on the internet guiding you to the “best” retirement cities and states. But even if you plan to stay in your own community or house, there are smart ways to prepare your home to be retirement friendly.

 First to consider is whether you’ll carry a mortgage in retirement. There are good arguments on either side of this issue, depending on the size of your mortgage and how low your rate is. In any case, contemplate this carefully to decide what’s right for you.

 Second, do you aim to stay in your house as long as possible? For some, the answer is an easy and emphatic yes. But for others, the appeal of downsizing is strong. Still others may wish to move closer to kids and grandkids.

 Wherever you live, consider what house layouts will work well for you as you age. Obvious considerations are having a first-floor bedroom and full bath. Without these, you’ll be forced to climb stairs at least twice a day, which could one day prove difficult or impossible.

 Barring the need for wheelchair modifications, many changes that make senior living safer and easier in your home are fairly modest undertakings. These include installing grab bars in your shower, changing round door knobs for lever-style hardware, and replacing lighting with LED bulbs that won’t need changing for years.

 Staying in your existing home may also call for a more significant remodel of your bathroom, for instance installing a no-step shower, bath or shower seating, and slip-resistant flooring.

 For those staying in a home, it can be smart to undertake some of these more costly changes while still working. Predictable upcoming maintenance like a new roof or heating system can also be wise to take care of while you’re still receiving a paycheck.

Five smart moves before you start the homebuying process

By Sabrina Karl

Whether you’re buying your first house or your tenth, what you do beforehand can substantially impact how well the homebuying process goes for you. These five pre-house hunt moves can maximize the amount of house you can afford, minimize what you’ll pay for it, and prevent as much frustration as possible.

At the top of any prospective homebuyer’s list should be a commitment to minding your credit score. Knowing your current score is the first step, and can be learned through a number of free apps or your credit card company.

Many homebuyers will want, or even need, to improve their score before applying for a mortgage. But even if your score is very good, avoid taking out any new loans or credit cards from six months before applying for a mortgage through the end of your approval process.

Second, don’t change jobs in the lead-up before applying for a mortgage. Steady employment, with regular paychecks the lender can verify, will lead to much higher approval rates and better rate offers.

Third, make sure you save enough for your down payment. Do your homework on the likely down payment percentage you’ll need, and be aware that if you expect to receive gift money, see if you can receive it several months before applying for your mortgage, since money that shows up overnight in your bank account can be a red flag to lenders.

Fourth, shop around for mortgage lenders. Don’t assume that your primary bank will be your best option. Though it may be, shopping around ensures you get a competitive rate, which can save you tens of thousands of dollars.

Lastly, apply for mortgage pre-approval to determine your realistic price range, which can save you from becoming emotionally attached to a home that’s more expensive than lenders will approve.

Haven’t refinanced yet? Time may be running short on lower rates

By Sabrina Karl

Mortgage rates are notoriously difficult to forecast. There simply is no mortgage market crystal ball, because the factors that influence rates are numerous, complex and interconnected.

That said, rates have started to rise from recent lows and most experts anticipate they will climb further, leaving the historic lows of 2021 in the rearview.

That means it’s time to strike while the iron is hot, or at least still warm, if you haven’t refinanced in the last two years. If rates continue rising and remain elevated, the window for cost-effective refinancings could soon close.

For perspective, let’s look at Freddie Mac’s weekly mortgage rate averages. At the start of 2019, the 30-year fixed-rate average stood at roughly 4.5%. It sank steadily through September 2019, until it touched about 3.5%, then rose up by year-end to approximately 3.75%.

Then came the pandemic. With the exception of a spike the week of March 16, 2020, when the U.S. entered full lockdown mode, rates cratered week after week until the start of this year. By then, the 30-year average had dropped to an all-time historical low of 2.65%.

Rates have risen and fallen since then, reaching a 2021 peak of 3.18% in late March, but later dropping to 2.77% in early August. Since then, they’ve mostly increased, bringing last week’s average to 2.99%.

Rates in the 3% ballpark are still historically low. So while we may never again see the Covid-triggered low of 2.65%, there is still great opportunity for many homeowners to save money with a refinance if your rate is in the mid 3% range or higher.

If you’ve hesitated to refinance because you think the savings won’t be that great or the costs too high, you may be surprised to learn how inexpensively you can refinance if you investigate multiple options.

What is a Jumbo mortgage?

By Sabrina Karl

If you’ve ever shopped mortgage rates, you’ve probably noticed the wide variety of loan types, many with cryptic names and acronyms. One of these is the jumbo mortgage.

You’d be right to assume that a jumbo mortgage is a really large mortgage. But how big is really large? And what’s different about applying for a jumbo loan?

Most standard loans are guaranteed by Fannie Mae or Freddie Mac, or federal programs like the FHA or VA. All of these agencies have rules for the mortgages they’ll guarantee, so banks stay within those guidelines whenever possible. These are called conforming loans.

One of the primary rule constraints on conforming loans is their maximum amount. Across most of the U.S., the mortgage cannot exceed $548,250. (Keep in mind this is the loan amount, not the property value.)

There are exceptions for high-cost areas, where housing is much more expensive. Instead of $548,250, the cap in high-cost areas can be as high as $822,375. Most of these counties are located around New York, Washington, D.C., and in California, with a few other counties scattered across other states. But most of the U.S. is held to the standard $548,250 limit.

If you’re looking to borrow more than the conforming maximum for your area, a jumbo mortgage is a logical choice. But be prepared that qualifying for one of these super-sized loans is a bit tougher, since these non-federally secured loans are riskier for lenders.

For one, you’ll need a higher credit score. You’ll also likely need a 20% down payment, and may also need to show you have ample cash reserves on hand. Paperwork requirements can also be more onerous for jumbo mortgages, so be prepared that you’ll need to jump through an extra hoop or two if going the jumbo mortgage route.