The coronavirus outbreak that has grabbed world headlines could also be partly responsible for you getting a better mortgage loan interest rate if you refinance an existing mortgage or even choose to buy a new home.
What on EARTH are we talking about with a headline like this? It’s simple. The coronavirus has fundamentally changed the way we save, spend, and invest.
The coronavirus and its’ related quarantines in Wuhan in the Hubei province in central China, Italy, Japan, and elsewhere may not DIRECTLY affect mortgage loan interest rates. But it DOES influence investor behavior.
What does that mean to a mother of two raising kids and managing a career? Or a single college graduate starting a new career in a new town?
Breaking Down The Coronavirus and Its’ Effects On Investor Behavior
It’s really quite simple; world events like the coronavirus don’t affect interest rates. But when investors see these headlines, a trend toward safe haven investments can be the result. Investors quit taking risks when there is volatility in the markets; they redirect their investments to Treasury Bills and other less risky places to put money into.
It’s the investor behavior that influences mortgage loan interest rates. And that behavior has, as of late, served to push home loan rates and refinance loan interest rates lower and lower. On Monday, February 24, 2020, rates were reported at the multi-year low of 3.25% for the most well-qualified borrowers.
And there is plenty of speculation. If the coronavirus situation doesn’t slow down or improve soon, we could be looking at mortgage loan and refinance loan interest rates going so low as to hit unexplored territory (at least in the 21st century).
What This Means To You: Buy, Build, Or Refinance
This is an amazing time to explore a refinance loan option, to buy a first home, or even to explore your construction loan options. But before you dive into comparing lenders, saving up for closing costs, and preparing for a new appraisal on your house (if you are refinancing), there is one other factor that is very important to remember.
Your Credit Scores Help Determine The Interest Rate Offered To You
If you have low credit scores (which you will need to discuss with a lender as FICO score requirements will vary from bank to bank) the interest rate you are offered won’t be as competitive as the one offered to an applicant with average-to-good credit scores.
So the low rates offered by the lender are only one part of the issue. You won’t know what rate you qualify for until you have submitted your loan application package.
Furthermore, you won’t be offered the chance to do an interest rate lock commitment until after that application has been submitted and processed. For those who are ready to commit to a refinance loan, having worked on their credit and payment history before doing so?
Now is a GREAT time to apply.
But if you are NOT ready (if you don’t know your own FICO score at the moment, you are NOT READY to apply for a loan) now is not a good time to rush headlong into the mortgage application process.
Joe Wallace specializes in personal finance, military affairs, and consumer protection topics. Since 1995, his work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and collects unusual vinyl records, which gives him an excuse to write the vinyl blog Turntabling.net.