by Maurie Backman | Updated July 19, 2021 - First published on Nov. 3, 2020
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Talk about some impressive numbers.
Whether you're looking to refinance an existing home loan or buy a new home, 2020 is a great year to get a mortgage (hey, we might as well get something good out of this otherwise dreadful year). That's because mortgage rates fell to historic lows during the latter part of the year, making it less expensive than ever to borrow.
In fact, mortgage analytics company Black Knight anticipates that by the end of 2020, there will have been more than $4 trillion in mortgage originations -- which would constitute a record. Of course, this assumes that mortgage activity stays high for the remainder of 2020. But that's what's anticipated based on existing mortgage rate locks.
Secure access to The Ascent's free guide that reveals how to get the lowest mortgage rate for your new home purchase or when refinancing. Rates are still at multi-decade lows so take action today to avoid missing out.
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Locking in a mortgage between now and the end of the year could mean you snag a really competitive rate. But there are a few things you should know about getting a mortgage at the moment.
Right now, it's possible to get a 30-year fixed loan for a purchase mortgage at well under 3%. But you'll only hook that rate if you have a high enough credit score -- namely, a score in the mid-700s or higher. If your credit score could use some work, you may want to hold off on applying for a mortgage. There's a good chance rates will stay low going into 2021, and even if they rise a little, you may still come out ahead if you apply when your credit is stronger.
Housing inventory has been low for months, due largely to the coronavirus crisis and economic recession. And that lack of inventory has been driving home prices up. The median U.S. home value in September 2019 was $271,500, according to the National Association of Realtors. In September 2020, it was $311,800. As such, if you apply for a mortgage this year, what you save on your interest rate, might cost you through a higher home price.
The limited inventory of homes means the properties available in your preferred neighborhood may not be in great shape. If you attempt to buy now, you may get stuck with unwanted repairs or features you just plain don't like, even if you can afford to pay a higher price.
While it might seem like a good time to get a mortgage, you should know things may look better in 2021. At that point, there may be more inventory to choose from, which also gives you time to work on your credit if need be.
That said, if you're thinking of refinancing your mortgage, you'd be wise to move very, very quickly. Beginning Dec. 1, there will be a 0.5% fee imposed on mortgage refinances, so if you're thinking of swapping your existing mortgage for a new one, apply now. Some lenders can close on a home loan in under 30 days. If you get your paperwork in order quickly, you may manage to avoid that fee -- and your refinance could reduce the overall cost of your mortgage.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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