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Closing the Deal When Your Buyers Want to Wait for a Lower Rate

July 15, 2013
From Loan Officer Daphne Tapp

From Loan Officer Daphne Tapp

Rates are still extremely low. Yes, it bears repeating! Why? Because as rates creep up to 4% and higher, buyers who didn’t lock in a mortgage rate while it was at its lowest may feel frustrated and anxious. Some may even decide they’ll wait to buy until the rates come back down. So how can you move them off the fence and educate them about the realities of mortgage rates so they can still take advantage of historically low rates?

One way is to share facts with them about the rate trends, and why it’s unlikely that they will return to the extreme lows we just experienced. In fact, by waiting they may end up spending more on a home than they would by buying now. Here are three key pieces of information to share with buyers:

1. Federal Reserve policies are changing, which will move rates up for the long-term. Without getting into heavy economics, explain to your clients that the Fed has been buying a high volume of mortgage-backed securities, which has kept rates low. They’ve indicated they will be easing away from that activity this fall or even earlier, which means private investors will need to take over, and they typically want a higher rate of return = higher mortgage rates.

2. Fixed rates of 2% and 3% are outliers. Let’s put it in perspective… previously, the 37-year low for a 30-year fixed rate loan was 5.23% – which happened in 2003. Mortgage rates were never as low as 3% ever.  There was a perfect storm of circumstances that allowed them to move lower than ever before including the housing collapse and the recession.

3. Rates are still very low, and home prices, too – an excellent combination. According to home prices are still 28% below their 2006 peak. Combined with a 30-year fixed rate that last week was still an affordable 4.46%, and your clients still have an amazing opportunity to get into the market – but they really need to make a decision and do it now.

http://money.cnn.com/2013/06/06/real_estate/mortgage-rates/index.htm

http://money.cnn.com/2013/06/27/real_estate/mortgage-interest/index.html?iid=SF_E_LN

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