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Mortgage rate question/advice - first time home buyer

1,687 Views | 8 Replies | Last: 4 yr ago by Jay@AgsReward.com
Ag13
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My wife and I are in the process of buying our first home and are currently in the option period which expires on Sunday. Over the past few days mortgage rates have ticked up a little bit. Our lender is urging us to lock in the rate now, but, I'm hesitant with the Fed Meeting next week and potentially dropping rates again. Seems like it's worth the gamble to wait until they make a decision before locking in our rate. The way I understand it, we have until 9/25 to get our financing settled and the closing date in our contract is 10/31. Any thoughts here on what you would do?

If the fed does cut rates next week, how quickly will that flow through to the mortgage market?

Because home buying is new territory I'm weary of making a 30 year mistake. I'm a finance guy, but still learning all the mortgage and home buying terms and processes. Have never really followed mortgage rates too closely until now, but have followed the Fed and have (I think) a decent understanding.
Ragoo
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I locked today.
deadbq03
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Don't be too hard on yourself with the "30 year mistake" talk.

Rates come and go. Who's to say the drop will happen later this winter instead of next month? Or what about after "the crash" in the next X months/years?

There's always refi's if you find a better rate later.

Congrats on the first home.
Aggie71013
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I bought my first home in December on a 15 year note at 4.25%. At the time all indications were that we would have several more rate increases. In hindsight mortgage rates have fallen considerably and I'm already planning to refinance. Don't sweat it to much as rates are still near historic lows and very cheap.
John Francis Donaghy
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You'll be fine. Rates are incredibly low right now. They might go lower in the future, they might not. But they are very good now.

If they drop considerably you can always refi. But odds are they won't change enough to be worth a refi before you sell the house anyway. First homes last about 5 years on average before the owners start looking to upgrade.

Congrats on the home.
permabull
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aggieiniowa
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If you are worried about trying to get the rate "right" it won't happen. We have been in our home for 5 years and rates are about where they were then. They have been slightly higher and for a short period of time slightly lower, but overall about the same.

If you want to make a bigger rate change, look at a 15 year compared to a 30 year. It might not work for you, however you will get a lower rate. It might be too much of your paycheck and not work, however when we made the decision to do a 15 versus a 30 the 1.25% on the rate was enough to make the extra money toward the mortgage payment worth it. It won't cost you anything to compare and then make a decision that works for you and your family.
JHUAggie
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How greedy do you want to be? Are you going to be kicking yourself for not locking in now and rates go up?

Bought house 4 years ago at 4.125%. Never looked back at interest rates because all indications were that the interest rates would go up.

Now locked in at 3.0% with our refinance. If rates continue to drop, then start looking at refinancing.

The only 30 year mistake you can make is not locking in at a low rate and having rates increase.
aTm2004
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Quote:

Because home buying is new territory I'm weary of making a 30 year mistake.
Don't look at the decision to potentially be that. You could always refinance to a shorter mortgage if rates drop enough to justify it and your budget allows. Also, if rates move, it's not like you'll be at a 3.7% today and miss out on a 2.7% next week. It will be slight and hardily noticeable to your overall out-of-pocket.

Just for reference, we went from a 15 year 3.5% on our old house to a 30 year 4.625% last year. Finished our refi a couple of weeks ago for < 3% on a 15.
Jay@AgsReward.com
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The fed does NOT control mortgages.In very simplistic terms Mortgage Backed Securities (MBS) set mortgage rates. So, really the worldwide bond market set interest rates as mortgage backed securities are just a bonds that are traded like any other stock or bond.

The bond market has more or less priced in a 100% chance the fed will cut at least .250% of a point. (https://www.cnbc.com/2019/09/05/the-fed-will-cut-rates-by-a-quarter-point-this-month.html ) So, the bond market along with MBS has long priced in a fed cut so do not expect a drop in overall rates directly due to the rate cut. (that does not mean they do not drop or go up a bit due to something else) but if the fed does NOT cut you expect negative reaction for rates.
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