Columbia SC mortgage loan experts say over 6 million people nationwide will buy homes next year. Statistics expect roughly 2 million will be first-time homebuyers. Both first-time buyers and others always wrestle with whether or not to pay “discount points” on their mortgage.
The Columbia SC Mortgage Loan: Points?
Just what the heck are discount points, anyway? Mortgage discount points are a one-time, upfront closing cost designed to discount the existing mortgage interest rate. One point is equal to 1% of your loan amount. Your interest rate is normally reduced by .25% for each discount point.
Since paying discount points lowers your interest rate, the process is often called “buying down” your rate. As an example, on a mortgage amount of $400,000 at 4% interest, you could elect to pay one discount point or $4,000 and lower your interest rate to 3.75%. For a borrower planning to be in that home for as long as a 30-year term, the interest savings over the life of the loan can be substantial.
Should you pay discount points? The answer is a resounding "that depends." Paying discount points can be expensive. Plus, it will mean you have to come up with more money at the loan closing. Still, it may make sense — especially if you can negotiate with the seller for him to pay part or all of the closing costs.
Paying points to lower your mortgage interest rate could be a good investment over time. However, if you plan to sell your home in a few years or refinance your mortgage you probably won’t recoup the amount you paid in discount points.
Because discount points are used to "buy down" your interest rate, they are usually tax-deductible.
Mortgage experts recommend you consider paying discount points as a luxury, not a necessity. If paying one or more points puts you in a bind by requiring you to pay additional money at the closing, it’s probably best not to do it.
Okay, what’s next? Consult your real estate agent about concessions the seller may make as part of your offer to purchase a home. You never know what you may get until you ask. Discuss discount points with your Columbia SC mortgage loan professional to find out your best course of action.
Get more up to date news and tips on Columbia SC mortgage loans by checking out our other articles under the Columbia SC Mortgage Info section just below Columbia SC Real Estate Categories to your right.
A loan closing attorney who, when reviewing the documents with a new Columbia SC mortgage borrower, used to jokingly say, “You’re welcome to read all these forms, and if you find anything in your favor the lender will be happy to correct that mistake!” Of course, he was only joking and he used that line as an ice-breaker. However, it’s very important that you review your closing documents to make sure they are correct.
Closing Your Columbia SC Mortgage Loan Accurately
Remember, you’re going to be asked to sign almost every document you'll see in the loan closing paperwork. You will be responsible for everything in those agreements. With mortgage terms up to 30 years, that’s a long-term commitment.
While most mortgage lenders are careful to make sure documents are accurate, mistakes do occur. One real estate expert says she has yet to see a loan closing where there wasn’t at least one typo, numerical error or other mistake. Her advice is to hope for the best and prepare for the worst.
The recent TRID (Truth in Lending/Real Estate Settlement Procedures Act Integrated Disclosure) rules require lenders to give borrowers Closing Disclosures at least three days before the loan closing. Mortgage insiders say borrowers should double-check three key areas: the loan amount, the personal and property information and the interest rate.
If you find an error, call your lender as soon as possible. It will either be corrected or new documents will be drawn up. If the mistake is serious, the lender may be required to restart the three-day disclosure period and delaying the loan closing. Such a delay could create a "domino effect" if the sellers need the proceeds from the closing to purchase their new house.
Economists and mortgage lenders are still keeping a watchful eye on Columbia SC interest rates. Federal Reserve chair Janet Yellen recently told the House financial services committee that no immediate decision has been made to raise interest rates. However, she said a December rate hike was still a “live possibility.”
Will Columbia SC Interest Rates Rise in December?
Anticipation and speculation over if and when the Fed will raise interest rates has been a hot topic. Housing experts have largely agreed that even a slight bump in Columbia SC interest rates would not have much impact on home mortgage rates. Still, the Fed is considering the possibility of a rate hike before the end of the year.
Yellen’s meeting before the House committee occurred one week after the Fed decided not to raise rates during October.
Yellen cited the U.S. economy as "performing well," saying domestic spending was increasing at a good rate. However, she cautioned that net exports and trade performance were slowing. She also referenced poor job gains in recent months. There were 64,000 fewer jobs added in September than had been projected. The U.S. economy added 271,000 jobs in October, and strong hiring drove unemployment figures down to 5%.
These and other factors may cause the Fed to raise Columbia SC interest rates during December.
Despite inflation currently below 2%, the widely accepted threshold established by the Federal Reserve, Yellen said that level is due to "declines in energy prices and the prices of non-energy imports." The Fed expects crude oil prices to rise slightly, then stabilize, moving the inflation rate back up to the 2% mark. Yellen says if that happens, "it could be appropriate to adjust rates in our next meeting."
The Fed chair reiterated there had been no firm decision made to raise interest rates in December. The decision will be based largely on the review of new data collected between now and then. Among the chief components of that data is one more jobs report for November. Whether Columbia SC interest rates will be affected will depend on how the Fed interprets the findings.
It’s important to note there is little correlation between a modest interest rate hike by the Fed and actual Columbia SC interest rates for mortgage loans. Historically, mortgage lending experts say a slight increase hasn’t had a big impact on home loan rates. A quarter-point rate increase on a $250,000 mortgage only increases the monthly payment by roughly $35. Lenders say it usually takes an increase of a full percentage point to have a noticeable effect on consumers.
Find more news that may affect Columbia SC interest rates in our Columbia SC Real Estate News section to your right under Columbia SC Real Estate Categories. We also post news and tips each day on Twitter and Facebook. Follow us there for up to the minute news on Columbia SC interest rates and mortgage news.
With the Federal Reserve being on the verge of raising Columbia SC interest rates for the first time in several years, at least one economist says there is little to fear. Mortgage rates will stay low for a good while, says the Wall Street Journal’s chief economics correspondent, Jon Hilsenrath, even if the Fed does decide in favor of a rate hike.
Columbia SC Interest Rates: Why They Won't Rise
Hilsenrath feels mortgage rates won’t be affected much, if any, despite what the Fed does for these main reasons:
1. The U.S. economy and, indeed, the global economy remain relatively weak, meaning the Fed won’t raise rates substantially in that environment.
2. The Fed has already said they don’t expect a big move primarily because inflation is so low.
Hilsenrath also points to the fact that we are entering a period of what will be a very slow progression of follow-up interest rate increases. The last time the Federal Reserve raised the interest rates, from 2004-2006, there wasn’t much of an increase in Columbia SC interest rates for mortgage loans, and the U.S. actually experienced a housing boom. Historically, therefore, he sees a precedent that most likely will be repeated — or, at a minimum, will not affect housing’s continued improvement.
Asked if the Fed does increase Columbia SC interest rates, will prospective home buyers rush to take action fearing other increases may occur, Hilsenrath said he doesn’t anticipate consumers will react out of fear. He thinks people will simply realize a rate increase “didn’t mean the world will end” and will go about their daily lives as if little had changed.
When asked about whether it was a good time for mortgage holders to refinance, Hilsenrath said the time for consumers to refinance is when it feels right to them. If there’s an opportunity now, people should probably take advantage of it.
Columbia SC mortgage rules may be about to take a big change, and the jury is still out as to whether it could be bad for the mortgage industry in the long haul.
If changes announced recently by Fannie Mae catch on, the process of having to fork over your pay stubs could go the way of 8-track tapes and cassettes.
Need a Columbia SC Mortgage – Fannie Says Forget the Pay Stubs
Fannie Mae announced recently that it would allow lenders to use employment and income information from a database operated by credit bureau Equifax to verify borrowers’ creditworthiness rather than requiring lenders to rely on collecting physical copies of pay stubs and tax data, which has been the time-honored tradition when trying to buy a home.
Other Columbia SC mortgage rules may also be changing with the intent of broadening mortgage access for some borrowers. Fannie said it will ease the lender process for granting loans to borrowers who don’t have a credit score. Later in mid-2016 Fannie Mae will also require lenders to begin collecting "trended" credit data from Equifax and TransUnion, which includes longer-term borrower credit histories.
The extra information will help Fannie see if borrowers are paying off their credit card bill every month or just making the minimum payment or if they’re letting balances rise. Borrowers who are making the full payment could see perks then.
Some minority groups have had a hard time obtaining loans in recent years, in part because those groups also tend to have lower incomes or less money for a down payment but also because they sometimes don’t have traditional credit histories. The new Columbia SC mortgage rules are designed to hopefully change all this.
Advocates and industry groups have been pushing the Federal Housing Finance Agency, which regulates Fannie and Freddie, to allow the companies to use alternative credit-score models that take into account utility or rent payments for potential borrowers who may not have a credit score. Borrowers who have a traditional score calculated by Fair Isaac will still need to meet the 620 minimum, on a scale of 300 to 850.
Stay tuned, we'll keep you up to date on these potential new Columbia SC mortgage rules and how they may affect the Columbia SC home buying market.