Buying A House During Corona Virus

– Hi guys welcome back to my channel we are in the midst of the Corona crisis. Everything is on lockdown
bars are now closed, restaurants are closed
separate takeout and delivery. San Francisco announced that they are enforcing a mandatory quarantine unless it’s absolutely necessary. So shits hitting fan
and a lot of my clients are asking me what does
this mean for home buying? What does this mean for interest rates? What should we do and
what should we expect? So in this video, we’re
gonna talk about Corona virus and how that’s gonna
affect you buying a home or refinancing your current mortgage. So if you think that’s
interesting, keep watching. Alright guys, so the first
thing I want to talk about in this video is
obviously the corona virus is spreading right now. And if you’re a homebuyer and wondering what you should do, there’s a few things that
I want to share with you. Okay, so the first thing
I want to talk about is interest rates. Okay, so President Trump announced that they’re cutting interest rates. So what does that mean exactly? A lot of people assume that that means mortgage interest rates
are gonna be lower. So I’m getting calls saying, Oh, you know, Trump cut rates, can I get a lower rate? So I want to use an article that I read two days ago on Mortgage
News Daily by Matthew Graham. He’s been writing for Mortgage
News Daily for 13 years, and he’s basically an
expert in mortgage markets, interest rates and things like that. So he wrote an article titled What The Fed’s Emergency Rate
Cut Means For Mortgage Rates. Okay, so the first thing
I want to mention here is he points out that I can’t count the number
of articles I’ve written, or the variety of ways I’ve
reported mortgage rates moving in the opposite direction as the Fed rate cut, slash hike, or simply put or despite a Fed cut. So basically, what he’s saying is sometimes when the Fed Cuts rates, interest rates for mortgages
actually will go higher. Okay, so it’s not directly correlated. So that’s the first thing you need to know is when Trump comes out and
says we’ve cut interest rates doesn’t necessarily mean immediately that your mortgage rates will be low. Down the line in the
coming weeks and months. That might be the case, but not right now. So actually, rates are higher now than they were a week or two weeks ago when we hit those all time lows. So here’s one of the
reasons why that happened. So I want to point to this
paragraph here in this article, one of the biggest reasons for the mortgage versus
Treasury disconnect, ’cause the Treasury rate is really low right now rates are high. So why there’s a disconnect is because there’s a massive supply glut of new mortgage debt caused by rapid refinance, demand recent. Okay, so there’s been so
many people refinancing that there’s a ton of new mortgage debt. So what does this mean? So this flood of mortgages
needs to be sold to investors in order for mortgage
lenders to keep lending. Okay, so mortgage lenders
believe it or not, they’re not actually keeping
the loans that they originate. They sell it to investors. Okay, so there’s been so many mortgages that have accumulated and
been sold to investors, that there’s not many investors left that wanna invest in
mortgages at this time. So like any marketplaces
with too many sellers, and not enough buyers prices rapidly fell and falling prices on mortgages equate to higher rates per consumer. That is part of the reason why interest rates are actually higher now. It’s because that’s part of the issue is there’s so many people who refinance, that they haven’t sold
these loans to investors so that they can generate more loans ’cause these banks like Quicken,
United Wholesale Mortgage, whatever, they don’t
want to keep those loans, they want to sell them to investors, okay? So I just want to give
you another example. So I have a scenario here pulled up it is, basically it’s a purchase. Someone wants to a buy house
700 FICO in 91335 very good, which is LA County, Single
Family, 520,000 loan amount, which is high balance in that area, and 20% down 700 FICO score. So a few weeks ago, this person could have
got an interest rate somewhere in the threes. Let’s see what it is today. So here we go. Alright, so guys, look at this. There is not even a part interest rate, which means no cost, okay? So if you want to 4.75 it’s gonna cost you 0.7% of your loan. This loan is 520, so it’s
gonna cost 3700 bucks. If you want a 4.5 it’s gonna cost $7,000 to get a 4.5% interest rate. This is weird thing where they want you to
take the 4% interest rate. But anyway, if you want a
4% interest rate or 3.99, it’s gonna cost you
$7,000 to get that rate, whereas a couple weeks ago,
it wouldn’t cost you anything and you would get a rate in the threes. So let’s change this
loan amount to 500,000. (gentle music) So let’s go into the
conforming loan amount. So that was high balance. This is conforming, so
you’re buying a house 20% down conventional
conforming loan 4.75 again. Look 4% cost you 1% in fees, so it’s an extra cost. Not the worst thing in the world, if you really need to buy a house, you might have to suck it up,
you could still get a 3.99 you have to pay 1% extra in fees. Okay, so but people were very used to these low rates for such a long time. That sounds crazy and they’re
not gonna want to do it. Okay, so that’s the first
thing I want to show you guys. That’s what’s happening
with interest rates. They’re higher rates, higher
than what we’ve been used to. Not crazy high, not, 98s is
high, or 90s, or even 2000s, but higher than what we are used to. So next thing we should
talk about is home prices. So what does that mean for home prices? Well, my personal clients that
are looking to buy a house, they’re a little scared right now. They’re gonna sit on the sidelines, they’re gonna wait a month or two and see what develops and what happens. Okay, depending on what
happens with interest rates in the market and this whole
virus, everything goes away. I think things will
just go back to normal. Okay, so if we give it a couple of months, let this thing pass, let
this hysteria craziness go away, things will go back to normal. Okay, so as far as home prices, not the best time to sell
your home at this time. So that’s my opinion. However, there was a house that
my client was interested in, I called the agents and
they had five offers. So there are people still out there who are putting in offers, we have yet to see if they
will actually go through with the house and if
they will buy the house. So that’s another story. But people are still putting in offers. So you know, whatever that means. So, home prices right now,
probably gonna stay stagnant might go down a little bit
over the next two months. But I predict things
will just pick back up where they left off after
this is all over and minus. So one last thing I want to show you guys is we wanna look at the end of this article from Matthew Graham. So what’s the guidance
that he’s giving right now? What should you be doing during this time? ‘Cause rates are going up, they’re going down, they’re fluctuating. So here’s what he suggests. If you haven’t done so already, make sure to talk to your originator. That would be me. Make sure your originator
has what he needs in order to lock your loan
when the time is right. Make a game plan, talk
about where rates are now and what you’re looking to lock at. Okay, so make sure they have what they need in order to lock. So okay, so he’s also saying, I’ve never felt it wise
to give blanket advice to people in different scenarios. That’s also a very good point. A lot of people are in a
lot of different scenarios. So that’s why it’s good to
talk to a loan originator, mortgage loan officer,
whatever you call us, and talk about your specific scenario. Okay, so here is the encouraging
news in this article. So where rates go from here will depend on where the bond market goes. To be sure there’s a good chance that yields will stay extremely low, and move lower due to what many see as a fairly large and
inevitable recession. If that increasingly looks to be the case, mortgage rates will
gradually return lower. But and this is the important but. Mortgage rates aren’t
dropping by point 5% today, and they’re not anywhere close to zero, they were a lot closer to 4% on Friday. So what he’s saying here is that they will return to low rates gradually. So we’ll go back to the levels we were at. I believe that it will be gradual. It’ll take a few weeks,
maybe a couple of months, but it will happen. That’s my guess. So like he said, here, at
the end of this article, talk to your loan officer, have a game plan, let them know what your target interest rate is that you’re looking to lock at. Okay, what interest
rates you want to lock, what’s your sweet spot and
get them whenever they need so that they can be ready
when it comes time to lock. Okay, so the last thing I
want to leave with you guys as far as the home prices and home buying or just investing in general, if you’ve invested in the stock market, cryptocurrency, gold real
estate, whatever the case may be, I just want to remind you guys
of Warren Buffett’s quote, where he says, “Be fearful
when others are greedy “and be greedy when others are fearful.” So these are fearful
times I would recommend, obviously, I’m not a financial expert. This is not financial advice. Disclaimer, but prices are
low right now on stocks. The S&P, Gold, cryptocurrency, real estate even might take a hit right? If everyone’s scared to buy a house, now might be the time to
jump in, get that house at a slightly higher interest rate, and then refinance in six months to when the rates go back down. Right if everyone’s
scared to put in an offer and scared to buy a house,
it might be the opportunity you’ve been looking for
to get a great house at a great deal. So I’ll leave you guys with that. Hope you guys are all well,
hope you guys stay safe. And I will see you guys again next week.

One Comment

  • Would you consider refinancing or buying a home during the corona virus? Let me know in the comments below!

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