“For example, I locked one loan today that would have cost the borrower 1.213 points on Monday versus 0.375 today. This loan amount happens to be $610,000, and the cost of the rate went from costing $7,400 to costing $3,200 today,” Hoff said. “The average mortgage loan amount in the U.S. is $405,000, and saving an extra 80 basis points could equate to $150 to $250 a month, depending on the overall scenario. This is huge for borrowers.”
According to Hoff, borrowers who take advantage of these rates are those who have purchased or taken a cash-out refinance over the past 12 to 18 months. In addition, some borrowers are looking to buy now or have been prequalified this past year.
“They can take advantage of a lower payment or even qualifying for a higher purchase price if the DTI was a key factor in the preapproval,” she said.
Hoff has already advised her clients on “rate alerts” to “get the ball rolling now so that they can be prepared for when the rate reaches the level of benefit.”
Looking forward, she believes rates will be volatile and “jump all over the place, just like the stock market.”
“Usually, when rates take a big drop, we see a correction the following week,” Hoff said. “I hope this is not the case, but I advised my clients that this is the reason why I locked three loans today.”
Cutting fees for VA borrowers
Patton Gade, the national director of military lending at UMortgage, said he believes the market has already priced in a September rate hike. He’s not limboing as low as possible on rates but is stacking fees on top or structuring refis to eat up equity.
“Some will dazzle with a 5.2% rate, but they’re charging a full point on the origination fee and two discount points,” Gade said. “I believe the best way to care for the veteran is a loan with little to no fees. The lowest rate for the lowest possible cost is the way I want to go.”
As for the future, he’s not banking on the notion that rates are going to continue dropping into the low 6s and beyond.
“You can’t bet your life or client’s financial future on what we think might happen in the next six, 12, 18 months. Things happen that are unexpected,” Gade said.
Daniel Sa, a division president at NFM Lending, said he’s been proactive in communicating with past clients about how they can benefit from refinances. He’s telling clients they can refi with no lender fees and get an appraisal reimbursement.
“Given the recent positive shifts in the mortgage rate environment, we believe the coming months, especially between September and December, will be the optimal time for our clients to refinance,” Sa said.
“For new customers, we are currently quoting competitive rates that reflect both the current market conditions at 6.375% to 6.750% and our anticipation of further rate reductions,” he said. “This strategic positioning is designed to ensure our clients not only benefit from potential rate decreases but are also well-informed and prepared to act quickly to optimize their mortgage terms.
“Our aim is to keep our clients ahead of the curve, maximizing their financial benefits and enhancing their overall satisfaction with our services.”