Thinking of Buying a Utah Home for Sale?
Keep Track of America’s Unemployment Rate
by Joel Carson
Utah Real Estate P.C.
Throughout the United States’ economic crisis and housing market crash, we’ve watched mortgage rates drop to new lows consistently. An announcement by the Federal Open Market Committee (FOMC) this week could change all that sooner than later. In its last meeting of the year, the FOMC made an unexpected move to tie mortgage rates directly to the country’s unemployment rate. If you’re ready to get serious about purchasing that house in Salt Lake City or a condo in Park City, this is a good time.
Originally FOMC targeted mid-2015 as a goal date to reach toward some growth in the rate based on a recovering economy. Now, the target is a moving one and the good news is the Fed is shooting for a jobless rate of 6.5 percent compared to the 7.7 percent rate reported by the Bureau of Labor Statistics in November. Wall Street workers responded to that move today and the interest rate actually increased as a result of the announcement. Why? Because Wall Street predicts the unemployment rate will drop well before mid-2015. That could mean if you sit on the fence much longer, you’ll lose out on the opportunity to secure a great rate on that new Weber County horse property.
Is it just a matter of time before we see interest rates eek higher and higher? Let’s hope so – well, sort of – see, if rates go up it means the jobless rate is down. We wouldn’t want to wish for a higher unemployment rate to secure lower interest rates. This was an interesting approach for FOMC to take.
There’s obviously no reason to panic. Economics have a way of balancing out and if more people are working, more people will be able to afford to pay higher rates – a great boon to the US economy. As interest rates threaten to rise, many are hurriedly seeking a mortgage refinance loan to take advantage of bottom-line rates.
Hold on there – I have a few words of advice I hope you’ll heed before toppling head first into a refinance that could hurt you more than it actually helps you. Following are five refinance mistakes you should vehemently avoid:
1. Overlooking high closing costs
Different lenders require different closing costs. Shop around. If you end up paying ridiculous closing costs, you’re really not saving much are you?
2. Failure to compare all variables
Even a great clearance sale at your local department store is no great deal if it forces you to buy something you’ve never even wanted (because it’s just so cheap). No one knows for sure where mortgage rates are going, but you need to examine all of the variables before you leap on a screaming deal. The refinance should accomplish at least two of the following benefits for you:
- lowers your interest rate
- lowers your monthly payment
- shortens the loan term
Now, if a refinance meets two of these goals, that’s great. If it meets all three purposes and you qualify for the loan, go for it.
3. Fear of the short term loan
If the thought of a shorter term loan strikes fear into that heart of yours, stop and reconsider. Say you’re in a 30-year loan term. If you have paid on that loan for more than seven years, it could actually cost you more to refinance another 30-year commitment. A 10- or 15-year fixed-rate loan could save you thousands of dollars and 15 years of paying on your loan.
4. Forgetting about pre-payment penalties
Prepayment penalties are those nasty little notes to which many of us prefer to turn a blind eye. Do not ignore them. Depending on the conditions of your current loan, you could end up paying those penalties when you pay off the loan to start a new one. Ouch. You might not save so much after all.
5. Refinancing over and over
This is not a good idea by anyone’s standards. Sure, you could keep refinancing your mortgage every time rates drop, but it could take literally years to realize a savings by the time you incur the traditional costs of refinancing a loan.
Now really is a great time to refinance your loan if you avoid these mistakes and stay on track. Interest rates will begin to rise as our economy recovers so if you are planning to buy a Utah home for sale, a Tooele home for sale or a house in Huntsville, it’s time to make your move. Browse through our Utah home listings online and call me today at 801-673-3333 to move forward while rates are at historic lows.