• Phone: (714) 420-1997
    Email: vlong@uamco.com

  • Interest Rate Spike, And Where We Go From Here

    December 1, 2016
  • interest rateAs you may have heard, the recent weeks have seen the steepest rate spike in roughly 13 years. Within 2 days of the election, rates went up .5% to .625% across the board on most programs.  Examples of payment differential on certain loan amounts for a standard 30 year fixed look like this:

    $400,000 loan went from a $1796 payment to $1939, an increase of $143 per month

    $600,000 loan went from a $2736 payment to a $2951, an increase of $215 per month

    $800,000 loan went from a $ 3705 payment to $3994, an increase of $289 per month

    So you can imagine if the rate wasn’t locked, what this did to some people’s ability to qualify. For some, it took them out of the game as they were making offers for a purchase of a new home.  If their rate wasn’t locked on a refinance, for some, it destroyed the cost-effectiveness of the deal.

    So what does this mean, and where do we go from here?

    Our crystal ball has been broken for some time now, and rates could vacillate back and forth in the low 4% range (bare in mind some of us got very spoiled with rates in the high 3% range, and this is still an outstanding rate). But one thing we have seen over the years is that with an increase in rates sometimes comes an increase in creative financing.  The Dodd-Frank regulations of 2010 have severely inhibited many people from qualifying for a home loan regardless of historically low rates.  There had been talk of some deregulation and repeal of the Dodd Frank act.

    In my opinion, a full repeal of Dodd Frank is unlikely, as much as many of us would dance in the streets were it to come to fruition. But there is a likelihood that it will be amended, so even with an increase in rates, there would still be many more people perhaps back in the market place.

    Who are these people?

    The self-employed are the most affluent group of homeowners we can have, and they have been most hurt by the Dodd-Frank regulations. Aside from their affluence, they are job creators.  It kills me that I can get someone with a 580 credit score and 3.5% down a loan, but in some cases I can’t get someone who is a wealthy, self-employed  business owner-a job creator-a loan…even if they have a 780 credit score and 25% down.  Should regulations become more forgiving and favorable for the self-employed, we could see a nice influx of new buyers and refinance activity in the next year, even with rates on the upswing.

    It doesn’t cost anything to talk, so give me a call to discuss your options!

    Vance Long

    United American Mortgage Corporation

    Direct 714-420-1997

    vlong@uamco.com

    NMLS #1912

    BRE 01889503