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Free-falling mortgage rates are spurring many large banks and credit unions to try and lure new home buyers to their company, leading them to offer discounts ranging from the modest to the magnificent, and even causing them to cut closing costs.
Some of these deals include:
- Waiving some closing fees, such the appraisal and title-related charges, for people looking to refinance into 30-year mortgages in places like New York, Texas, and the metro area of Washington D.C., allowing them to save around $3,300 on average (Capital One)
- Discounting fees by as much as 0.75% to help offset discount points (Citibank and Bank of America)
- Acquiring lower rates and covering most of the refinancing costs if rates fall in the future, so long as they get a mortgage before December (Quicken Loans)
- Lowering closing costs by up to $500 for home purchases and refinances (Pittsburgh-based Standard Bank)
- Offering $2,500 off of closing costs for borrowers (the Navy Federal Credit Union, which services Department of Defense employees and their families)
Deals such as these are targeted mainly at home buyers, though some may be available to homeowners looking to refinance as well. The reason why home buyers are in these companies’ cross-hairs is because they’re simply more profitable, despite the fact that, according to the Mortgage Bankers Association, only around 20% of all mortgage applications are new purchase mortgages.
This lack of interest is puzzling to Standard Bank’s president and CEO, Tim Zimmerman, who said, “We are still amazed that record low interest rates and significantly lower home prices have not resulted in strong loan demand.” (My guess for why there isn’t more demand? It may have to do with the fact that the economy still sucks and people are still deathly afraid of losing their jobs. But I digress.)
However, there’s one thing that lenders aren’t putting on the table, and that’s lower rates.
What’s more, in some cases, there are stipulations that may prevent you from qualifying for their special deals (ex: in order to get BofA’s offer, you have to have a minimum of $50,000 tucked away in the bank or its investment firm) or even rates that may not be as low as possible. As of right now, the lowest rate available on a 30-year fixed-rate mortgage, according to LendingTree.com, is around 3.5% — but lenders will probably give you an average rate of 4.25%. That 0.75 percentage point may not seem like much, but on a $275,000 30-year fixed rate mortgage, it means that you’d have to pay an extra $120 every month and an extra $42,000 more over the life of the loan.
Our suggestion to qualified mortgage borrowers? Try and find a low interest rate, rather than gimmicky offers. Check out lenders like online outfits, community banks, and credit unions that might give you more leeway in regards to rates. If you acquire a low interest rate, you’ll save more in the long run — and that’s something that home buyers and refinancers alike can appreciate.
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Stephanie Huskey is the resident real estate blogger for Movoto and is of the opinion that anything you can do to save money in this economy is a good idea. Interested in getting her advice on your blog? She’s currently seeking guest blogging opportunities so she can share her knowledge with new communities! You can find her over here at Elance.com.
