Mortgage Fee Changes 2023

Presented by Marc Aarons

Hope everyone is doing well.  I am reaching out to share some important news that may affect mortgage loan fees if you plan to buy or refinance anytime in the near future.

Beginning May 1, 2023, new federal rules adjust upfront fees for loans backed by Fannie Mae and Freddie Mac. These fees are based on factors such as your credit score, the size of your down payment, and the type of home you’re purchasing.

Under these new rules, borrowers with better credit scores may end up paying more in upfront fees, while those with lower credit scores may pay less. The Federal Housing Finance Agency has stated that these changes are part of their efforts to provide “equitable and sustainable access to homeownership.”

Here are a few more details about the regulations in effect:

• All new or refinanced home loans signed after May 1, 2023, are subject to the new rules.
• Homebuyers who put down a larger payment of 15% to 20% or have a higher credit score could see an increase in mortgage fees (around $40 per month) for a loan of $400,000, while buyers who put less down or have less-than-perfect credit may see lower upfront fees.
• Keep in mind, however, that buyers who put less than 20% down will have to pay mortgage insurance, which will more than offset the lower upfront costs.

While the impact of these changes will vary depending on your circumstances, having a good credit score and a sizeable down payment is still key in securing the best mortgage rate. Buyers with credit scores of 680 or higher will still receive the largest fee reductions and benefit from better loan terms overall.

As always, it’s important to work closely with a knowledgeable team of professionals so you can understand your buying power, mortgage options, and how these changes may impact your loan payment.

That said, please don’t hesitate to reach out if you have any questions or concerns. I’m here to assist you however I can.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

The post Mortgage Fee Changes 2023 appeared first on Money Managers, Inc..

Putting Mortgage Rates in Historical Context

Presented by Marc Aarons

Hope you are doing well! It’s no secret that 2022 and 2023 have featured higher mortgage rates, making things more challenging for would-be buyers and refinancers than in the recent past.

That said, rates are much lower now than they have been historically, and I think this historical perspective could, if nothing else, be helpful context for Americans in 2023.

Take a look below at a brief history of mortgage rates. I hope you find this compilation interesting and informative!

1970s

Disco found its way into the lives of Americans right around the time Freddie Mac started tracking rates for 30-year mortgages. 30-year rates danced near 7.50% to start the decade.

By 1974, inflation was an issue just as it is now, and 30-year fixed mortgage rates jumped over 10%, ending the 70s near 13%. Yikes—but even higher rates were on the way!

Median single-family home price in the United States in June 1975: $33,298

1980s

High inflation persisted into the 1980s, with 30-year mortgage rates peaking around 18% in 1981.

Stagflation was the theme of the time, which translates to non-existent economic growth and persistently high inflation. The widely followed Consumer Price Index (CPI) reached a high of 13.6% in 1980 compared to its June 2022 peak of 9%.

As the decade finished, 30-year mortgage rates fell back to single digits, settling at around 9.94%.

Some folks point out current economic similarities to that of the 1980s, and that is part of the reason some see 7% to 8% 30-year fixed rates as not so high right now.

Median single-family home price in United States June 1985: $70,642

1990s

This decade saw AOL and Yahoo take off over 56k dial-up modems. 8% to 10% was roughly the range for a 30-year fixed mortgage over this decade, higher than where we are today.

Median single-family home price in the United States in June 1995: $108,511

2000s

Dot-Com boom and bust to start. Financial crisis to finish.

Rates started the decade near 8% and fell over the next ten years, ending the decade near 5.20% after the Fed cut rates rapidly in response to the 2008-2009 financial crisis.

Median single-family home price in the United States in June 2005: $200,950

2010s

After the financial crisis, many folks lost homes in foreclosure, and interest rates stayed low as home prices stayed suppressed through 2012. Then, home prices began to rise.

This time was the beginning of super-easy monetary policy: 30-year rates stayed around the 3.45 – 4.90% range. Not too much lower than where we are now.

Median single-family home price in the United States in June 2015: $212,400

2020s

Here we are. The onset of the pandemic ushered in extremely low-interest rates as the Fed dropped rates to near zero. 30-year rates traded to extreme sub-3% levels in 2021. Rates had never been so low since Freddie Mac started data tracking in 1971.

Current points to consider:

• Mortgage rates are still on the low side of historical averages over the last 50 years.
• Mortgage rates have pulled back from their highs in November near 8%.
• Recent Consumer Price Index (CPI) readings have shown some relaxation in inflation, potentially an encouraging sign for the mortgage interest rate markets.

Buyers today can consider something that many seasoned real estate investors preach: “You can always change the interest rate, but not the purchase price.”

Should rates decline in the future, a home purchaser can always refinance their mortgage later. In fact, now that many real estate local markets have normalized, higher rates may be offset or softened by lower prices (at least compared to recent years).

With that last point noted, I hope this historical perspective was helpful. If you have questions about the current real estate market or mortgage rates, respond to this email or give me a call.

I’d be happy to talk through where things are now and where prices and rates may trend the rest of the year.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

The post Putting Mortgage Rates in Historical Context appeared first on Money Managers, Inc..