Still time to take advantage of low mortgage rates

Mortgage rates - how low will they go?

"Personally, I believe mortgage rates will stay very low at least for the rest of the year, but the Federal Reserve is attempting to push rates up somewhat," said Bob Shields, executive vice president at Wintrust Mortgage.

Shields said Federal Reserve Chair Janet Yellen has indicated there may be an increase near the end of the year.

Frank Binetti, president of Inland Home Mortgage, echoes Shields.

"We don't anticipate a big change in interest rates between now and the end of the year. We don't see the U.S. or world economy improving enough to drive mortgage rates much higher," he said.

Of course, rates on mortgages change daily, but they have been on a downward trend for most of 2016 with the rate on a 30-year fixed mortgage coming down to 3.625 since the beginning of the year.

Many experts predicted rates would rise throughout the year following the Federal Reserve's rate hike in December, but home loan rates didn't increase - they reached near record lows.

Some experts say there's little chance of a mortgage rate hike this year or even in 2017. Yet others say you cannot predict rates for the rest of the year based on what has happened so far this year. However, the fact that mortgage lenders are willing to lock in low rates for 30 years suggests they don't believe the Fed will raise rates significantly.

When trying to lock in the best mortgage rate, there is no Magic 8 Ball at which to look, experts say. So how do we predict what mortgage rates will be? Historical data, current economic trends and instinct often provide the basis of making such a prediction - or in other words, an educated guess.

What do today's low mortgage interest rates mean for local lenders?

"Most lenders are bursting at the seams with business," Shields said. "It's been an extremely busy year for us - busy for refinancing, but also an uptick in the purchase market at the same time."

Binetti also sees quite a few people buying homes, and that's positive for the economy, he said.

"We're also seeing more construction of new homes, which is good, too. They don't usually come into the market until the resale market is saturated."

Along with low mortgage interest rates, guidelines for conventional home loans have relaxed, which means more people are able to qualify for a mortgage, Binetti said.

"The pendulum has swung back toward the middle, which is good for homebuyers, but it's not where we were before the downturn," he said.

Refinance or home equity loan

Although many people have already refinanced their homes to take advantage of the current low rates, this is a great time for those who have been hesitant or busy with other aspects of their life to consider a refinance.

It's also a good time to take advantage of a home-equity loan for debt consolidation because of the aggressive rates offered in the market, Shields said.

Home equity rates are lower than credit card or other loan rates, so borrowers can lower their monthly payments by consolidating debt. The interest may be tax deductible, while credit card and auto loan interest payments are not.

Products

With the lending climate today, there are many opportunities for people to receive assistance in buying a home. Wintrust Mortgage offers almost every product you can imagine, Shields said.

Here are some programs offered in the marketplace.

• Down payment assistance

The Illinois Housing Development Authority offers a lot of down payment assistance programs through various agencies where a borrower may be able to receive a $7,500 down payment assistance grant on a 30-year fixed mortgage. This program is tailored for first-time buyers, veterans and anyone who hasn't owned a home in the last three years.

• 2/1 buydown program

A temporary 2/1 buydown provides buyers of newly built homes with a reduced interest rate for up to the first two years that they're in their new home. The initial interest rate reductions are either paid for by the borrower to help buyers qualify for a mortgage, or by a builder as an incentive for the buyer to purchase a newly constructed home.

The buydown is for buyers who want the security of a fixed rate but want to ease into their payments and for builders trying to move homes that have been on the market. Some would rather do a buydown than discount the price of the home.

The program is similar to a professional services program for doctors and lawyers who are carrying a lot of education debt, but who will have a large income in the future.

• Construction loans

Many lenders now offer one-time-close construction loans that finance construction of a custom home by a licensed contractor to help the builder and buyer. People can lock up a rate and not have to worry about that rate rising while their house is being built. And typically during the construction phase, the minimum monthly payment is interest only.

During the Great Recession after the housing meltdown, a lot of banks stopped doing construction lending because it was speculative financing, and the product hasn't been offered in years, Binetti said. "We're doing it now because the market bounced back and is strong."

• I-REFI program

This new program is designed to help homeowners who are current on their mortgage payments but owe more than their home is worth, called "being underwater," because of declining property values during the recession. IHDA offers federal assistance to underwater homeowners to reduce the balance owed on their mortgage and refinance into a new, more affordable loan based on the current market value of their house.

A perspective

Although, as discussed, no forecast is 100-percent accurate, here is one perspective that may be worth attention.

"With the U.K.'s decision to exit from the European Union (known as 'Brexit'), global risks increased substantially, leading us to revise our views for the remainder of 2016 and all of 2017," said Sean Becketti, Freddie Mac chief economist. "Nonetheless, the turbulence abroad should continue to create demand for U.S. Treasuries and keep mortgage rates near historic lows, thereby allowing home sales to have their best year in a decade, along with a boost in refinance activity."