Spring 2016 Presents Opportunity to Buy, Refinance Homes

As the country thaws out from a relatively short-lived winter, things seem to be on the up-and-up for the real estate market as well. In a report on mortgage rates for the week ending March 10, Freddie Mac found that although rates were ticking up slightly, they remained lower than a year ago  almost across the board. The 30-year fixed-rate mortgage averaged 3.68 percent, compared to 3.86 a year prior. Fifteen-year fixed-rate loans were averaging just 2.96 percent compared to last year's 3.10 percent. Even the 5-year adjustable-rate mortgage was going for just 2.92 percent, compared to 3.01 percent in March 2015.

"Mortgage rates remain at their lowest in over a year."

Although on a generally upward trend over the last several weeks, average mortgage rates are still at the lowest in over a year ever since hitting a recent peak in December 2015. That spike was on the heels of a Federal Reserve decision to begin raising the federal funds rate for the first time in almost a decade, with all signs pointing to a strong and growing economy. While hiring and other general economic factors remain robust so far in 2016, a host of fears about the rest of the world's economy has made banks cautious once again.

That all means that if you're a homeowner, or would like to become one soon, it's still a great time to buy. Take advantage of low rates while they last and use this opportunity to look into applying for a mortgage or refinancing your current one.

New homebuyers
If you are ready to finally get into the real estate game after years of renting, you are in a good position to do so. According to research from real estate information website Zillow, the average renter in the U.S. will break even on their home purchase in less than two years . That means that in this amount of time, they will already have paid less for a mortgage than they would have if they were renting. This is especially true given the historically low interest rates homebuyers are seeing lately. 

How does one get started down the path toward a home loan? There are many roads to take, but for many, they start at a local bank. According to National Mortgage News, banks are now the largest originator of home loans  in the U.S. This may be due in part to the relationship many have already established with their local bank after years of saving with them. Of course, you can always shop around at other banks to find the most favorable deal.

Before signing on the dotted line, Realtor.com noted that it's important to consider the details . The biggest question homebuyers must ask is how long they can commit to a mortgage. If the homeowner or couple expects their living situation and careers to remain stable for the next 10 years, a fixed-rate mortgage may be the safest bet. However, some studies have shown the average homeowner to stay in a home hardly more than 10 years. Weigh all the possibilities as you consider making the leap.

Refinancing
The persistent low-rate environment also bodes well for current homeowners considering a refinance on their mortgage. A recent study from Black Knight, a financial services firm, found around 3.3 million mortgage borrowers could save at least $200 per month  on their loan payments if they refinance now. A full 1 million could save twice that amount per month, with the average borrower standing to gain an extra $3,000 per year with the right refinance plan.

However, the firm also found that refinance rates dropped all throughout 2015. Black Knight's data showed refinance originations fell 27 percent from beginning of the year to the end. This runs contrary to the narrative that prevailed throughout the financial world last year. As the economy continued to improve, many warned homeowners to cash in on low rates before they began rising. Gail Marks-Jarvis of the Chicago Tribune spoke to Freddie Mac senior vice president Ben Graboske, who was perplexed  at this lack of refinance activity.

"It's a head-scratcher why more borrowers haven't refinanced," said Graboske, according to the Tribune. "They are literally leaving money on the table."

Marks-Jarvis speculated that borrowers' hesitation to refinance was likely due to low credit scores. Black Knight, for example, considered those with FICO scores lower than 725 ineligible for a refinance. This underscores the importance of maintaining a good credit score, which can be extremely useful not only when looking to refinance but when shopping for a mortgage in the first place. Higher FICO scores mean lower rates and a better chance of getting the best offer.