Q: My daughter is buying a house from me with 25 percent down in cash. We can close anytime and at age 28, she has excellent credit (over 700). Should she get a mortgage now or should we hold off a few months for a better interest rate as rates are now climbing again?
A: I don’t think anyone knows where interest rates are going at the moment — they could go up or down or stay even between now and the end of the year.
But it’s true that mortgage interest rates have been on the rise lately, despite the Federal Reserve lowering the short-term federal funds rate. That, in conjunction with falling home values, is making some buyers nervous.
I hope mortgage interest rates don’t climb much beyond where they are at the moment. If they go too much higher, first-time buyers like your daughter may have trouble qualifying for the home.
In your case, it sounds as though you have the luxury of time on your side. If I were you, I’d help your daughter find a quality lender and get pre-approved for her mortgage. That way, when you’re ready to close, the lender will be ready as well.
If your daughter decides to obtain financing now and rates go down to a level that would justify her refinancing the loan, she can do that at a later date. The interest rate your daughter gets on her loan today is still at a historically low level.
Rates may rise over the next couple of months and if she waits, she’ll have lost the opportunity to get today’s rates. But if she takes today’s rates and over the next year or two rates decrease, she should have the ability to refinance the loan to that new lower rate. And, if rates decrease after she applies for the loan, many lenders will give her the ability to re-lock her loan rate one or twice before the deal closes.
Leave A Comment