Rates are heading up rapidly! Since 9/1/2021 when the best 30yr fully amortized loan interest rate was 3.625%, there has been a steady increase. Within the past 7 days, the same institutional lender has increased its rates to 5.750%, the lowest possible rate available. This is a 2.125% increase in approximately 6 months. Interest rates will remain volatile during this period of inflation. As the Fed works to rein in inflation by adjusting the rate upward, we will continue to see these increases.
What can be done to mitigate these increases?
When your Loan Officer requests Documents please be expeditious in sending them. We are seeing investors delay signatures, sending documents, and poor response times which have led to as much as a 1.00% to 1.25% increase in the interest rates. Investors want to see the mailbox money flow in with a minimum of effort, that is understandable. But when it comes time to purchase or refinance a property, please make sure that your entity documents are in order. This means signatures are where they should be (the biggest issue we see today), That a clear chain of ownership of the entity is evident. Lawyers like to hide the ownership trail to minimize exposure to risks. Lending institutions want to know exactly who they are lending to, minimal smoke and mirrors make the organizations with the money happy.
Some lenders offer a rate buy-down. The basic way this works is that by paying an increase in the origination points to the lender the interest rate can be lowered. Generally, this is a ratio of points to interest buy-down. An example could be:
The ratio is 0.333% per Point. The maximum buydown is 2 points or 2 times the buy-down points offered.
|New Interest Rate||7.000%||6.667%||6.334%|
There are other lenders that offer a similar buy down at a rate of 0.5% maximum for an increase in the lender’s origination points of 1.5%. This buy down can be bought in 0.125% increments if that works for your program.
BUT WAIT THERE IS MORE!
We do have better news if you are doing a BRR strategy and not just a regular refinance and are open to a 5 or 7 year ARM. Call us today to find out more about all our options.
If you need funding, apply now.
Patrick St. Cin
W – 512-213-2271